Eagle Eye Regulatory News (EYE)

21 September 2022

Eagle Eye Solutions Group plc

("Eagle Eye", the "Group", or the "Company")

Final results for the year ended 30 June 2022

An exceptional year of growth, creating value for some of the largest retailers in the world

Eagle Eye, (LSE: "EYE"), a leading SaaS technology company that creates digital connections enabling personalised, real-time marketing, is pleased to announce its results for the financial year ended 30 June 2022 (the "Year").

The strong performance in the Year was driven by substantial new wins, the increased speed at which customers have gone live and the continued deepening relationships with existing customers, as they take advantage of the full capabilities of the AIR platform. Through the drive and dedication of our exceptional team, we are at the forefront of the digital transformation taking place in the world of retail marketing and our performance for the Year is a demonstration of the momentum across the business.

Financial Highlights

* Period End Annual Recurring Revenue is defined as period exit rate for recurring AIR subscription and transaction revenue plus any professional services contracted for more than 12 months hence and secured new wins, excluding any seasonal variations and lost contracts.

**Net retention rate is defined as the improvement in recurring AIR revenue excluding new wins in the last 12 months.

***EBITDA has been adjusted for the exclusion of share-based payment charges along with depreciation, amortisation, interest and tax from the measure of profit.

**** Net cash is defined as cash and cash equivalents less financial liabilities.

Operational Highlights

· Acceleration in revenue growth to 39% as the Group continues to deliver on its customer strategy: Win, Transact and Deepen

o  New customers secured in the year include two new U.S. customers and Halfords Motoring Group

o  A number of significant customer contracts moved into the transactional phase, including Woolworths in Australia, Staples US Retail, Virgin Red, Halfords Motoring Group and Waitrose

o  Strong increase in interest in our loyalty offerings by customers such as Asda, Pret A Manger and PizzaExpress, as they seek to retain their customers in the post-pandemic environment

· Strong performance reflects the strength of the Group's SaaS business model

o  ARR up 41% to £23.9m, NRR increased to 145% and maintained low churn at less than 1%, providing a strong basis for continued expansion

· Focused on delivering profitable growth

o  54% increase in adjusted EBITDA to £6.5m and an increased adjusted EBITDA margin of 20%, considerably ahead of our initial expectations for the Year due to strong revenue growth and careful management of the cost base, whilst still investing in product and sales & marketing

· Encouraging progress in the U.S.

o  The Group now has five clients in North America including two through Eagle Eye's influential partner, Neptune Retail Solutions

o  North America is the fastest growing region, contributing 56% of Group ARR

· Committed to making Eagle Eye a great place to work

o  Awarded three-star accreditation by Best Companies to Work for 2022

· Continued evolution of our offering to meet the needs of the world's largest retailers

o  A focus on increasing our product flexibility and platform speed and scale

o  Platform speed increased by five times through our database design, cloud architecture and system design

Outlook

· Eagle Eye has entered FY23 with momentum across the business, a strong new business pipeline and a growing international opportunity, in the U.S., Europe and Asia

· Whilst the Group is cognisant of the inflationary environment,  the business has successfully mitigated these challenges to date, and is confident in its ability to continue to do so

· Trading in the current year is in line with Board expectations and the Board is confident in achieving a positive year of profitable growth in FY23

Tim Mason, Chief Executive of Eagle Eye, said:

"I am incredibly proud of the successes achieved this Year by our fantastic team, against a challenging economic backdrop. Through their drive and dedication, we are at the forefront of the digital transformation taking place in the world of retail marketing.

"In the current difficult economic environment, customer loyalty and effective promotions are more important than ever. The retail industry is becoming increasingly aware that data driven, personalised promotions are one of the most effective ways to drive increased trade. The ability of our AIR platform to deliver 1:1 marketing, in real time, at an enterprise scale, means we are well positioned to address this growing customer need.

"The prospects for Eagle Eye are increasingly positive and we have entered FY23 in a very strong position with considerable momentum across the business. We have a substantial addressable market, high profile customers in multiple geographies, a proven offering and a high-quality business model driving growth in revenue and profits and generating cash. These factors, coupled with our strong new business pipeline, and growing international opportunity, underpin the Board's confidence in the long-term success of Eagle Eye."

About Eagle Eye

Eagle Eye is a leading SaaS technology company transforming marketing by creating digital connections that enable personalised performance marketing in real time through coupons, loyalty, apps, subscriptions and gift services.

Eagle Eye AIR enables the secure issuance and redemption of digital offers and rewards at scale, across multiple channels, enabling a single customer view. We create a network between merchants, brands and audiences to enable customer acquisition, interaction and retention at lower cost whilst driving marketing innovation.

The Company's current customer base comprises leading names in UK Grocery, Retail, Leisure and Food & Beverage sectors, including Asda, Sainsbury's, Tesco, Waitrose and John Lewis & Partners, Virgin Red, JD Sports, Pret A Manger, Greggs, Mitchells & Butlers, PizzaExpress; in North America, Loblaws, Shoppers Drug Mart, Southeastern Grocers and Staples US Retail and in Australia & New Zealand, Woolworths Group and The Warehouse Group.

Chairman's Statement

I am delighted to update our shareholders on another fantastic year for Eagle Eye, as demonstrated by the expansion in our customer base and growth in financial metrics. The strong performance in the Year was driven by substantial new wins, the increased speed at which customers have gone live and the continued deepening relationship with existing customers, as they take advantage of the full capabilities of the AIR platform.

Of particular note was the considerable progress achieved within the North American market, our fastest growing region, contributing approximately 56% of Group ARR at Year end. Our partnership in the U.S. with Neptune Retail Solutions continues to progress well, with two joint customers now successfully live, elevating the profile of Eagle Eye in what is expected to be the world's largest digital promotions market.

This expanded international footprint, growing number of enterprise customers and continued investment into the team and product, provides an exciting basis for profitable growth in the years ahead.

Financial Results

The quality of the Group's SaaS business model can be seen in the strong financial performance in the Year. The increased win rate, success in deepening customer relationships and low customer churn meant Eagle Eye delivered a considerable acceleration in revenue growth of 39% (FY21: 12%) to £31.7m (FY21: £22.8m). Continued careful management of the cost base, whilst continuing to invest in the product and sales & marketing, resulted in an increase in adjusted EBITDA for the Year of 54% to £6.5m (FY21: £4.2m), and an increased adjusted EBITDA margin of 20% (FY21: 18%), considerably ahead of our initial expectations for the Year. As a result, the Group reports strong growth in full year profit before tax, up 44% to £0.7m (FY21: £0.1m), and a maiden profit after taxation of £0.6m (FY21: loss of £(0.1)m), and a maiden profit after taxation of £0.7m (FY21: loss of £(0.1)m).

All businesses are now operating in an inflationary environment and Eagle Eye is no exception. The management team have proven their ability to successfully navigate these challenges, balancing investment into the business with maintaining financial strength, and the Board is confident in their ability to continue to do so.

The Group's net cash position was £3.6m at year end. During the Year, the Group entered into a new three year £5m funding facility with Silicon Valley Bank, undrawn at the period end, with up to an additional £2.5m available, subject to credit approval at the time, should there be an appropriate investment opportunity. This provides the business with security and flexibility over its financing options to deliver on its growth aspirations.

ESG and Our People and Values

As a Board, we are committed to high standards of ESG and made good progress against our stated objectives during the Year, building on our existing foundation of responsible business practice. Key to any policy is benchmarking and data, and we are measuring our progress through KPIs and comparing them to the market median to allow focus on areas of improvement.

An important part of our social contribution has been our partnership with 52 Lives, a fantastic charity built around the concept of 'kindness' where we have a commitment to help an individual or family in need every month of the year. Our internal focus of the year has been the Purple Women initiative, launched in 2021, which aims to increase representation of women across the business, where we have continued to make important progress.

Minimising any impact on the environment from our operations remains an important focus for the business. The introduction of 'Virtual First' has had a positive impact on the travel requirements for our employees and therefore a positive impact on carbon emissions. We already have a low environmental footprint but ensuring that our key suppliers monitor and have targets around their environmental impact is a key part of our supplier code. We also recognise the importance and value of high standards of corporate governance and always look to maintain our strong corporate governance framework, which we have already adopted by following the QCA Code.

Eagle Eye places the success and happiness of its people at its heart, which was evident at the Company's annual conference in July 2022, where I was once again struck by the commitment, creative thinking and diversity of the team. On behalf of the Board, I would like to thank all the team for their commitment to delivering great service for our customers and embodying the Company's values. Against the current macro-economic backdrop, Eagle Eye has had a fantastic year built on the shoulders of an exceptional team.

Opportunity

The acceleration of digital strategies in the post-pandemic environment presents a considerable global opportunity for Eagle Eye. The US will continue to be a key area of focus in the current financial year, as we build on the strength of our partnership, and applicability of the AIR platform to capture a growing proportion of the ever-expanding retail market. We also plan to invest sales resource in Asia, building on the success of our two landmark customers in the Asia Pacific region, Woolworths Group in Australia, and The Warehouse Group in New Zealand. Building out from our UK success, we intend to expand further into Europe where there is a substantial addressable market.

We remain committed to profitable growth and will continue to review acquisition opportunities as they arise which complement our product and customer strategy across our international territories.

With a growing customer base, including some of the world's largest retailers, the investments we continue to make in our technology, alongside growing levels of recurring revenue and a strong sales pipeline, the Group has entered the new financial year in a robust position and looks to the future with considerable confidence.

Malcolm Wall, Non-Executive Chairman

CEO statement

I am incredibly proud of the successes achieved this Year by our fantastic team, against a challenging economic backdrop. Through their drive and dedication, we are at the forefront of the digital transformation taking place in the world of retail marketing.

This exceptional team is creating value through great technology, for some of the biggest businesses on the planet. Underpinned by ongoing innovation and investment in our platform, Eagle Eye AIR is a proven, enterprise grade loyalty, promotions, and stored value platform, trusted by some of the biggest and best retailers in the world.

We are as proud of the product we have built as we are of our incredible team who work tirelessly to ensure our customers get the maximum value from their investment in AIR. We believe that paramount to our success is our unique way of working, which we have formalised in the Year in our new Customer Promise. This serves to encapsulate our core values and communicates the things that are most important to us as a team; delivering a service we are proud of, always being transparent, trying to always do the right thing and caring deeply for our customers and partners.

The strength of our SaaS business model is evidenced by our strong metrics, with AIR ARR up 41% to £23.9m, NRR increasing to 145% and churn maintained at less than 1%, providing a strong basis for continued expansion. Revenue grew 39% in the Year, driven by all areas of the customer strategy. EBITDA margins continued to increase, whilst we also continue to invest, and this growing level of profits is now flowing through into positive cash generation, providing us with confidence to continue to invest to support our future growth. The upgrades to guidance twice during the year are a clear demonstration of the momentum across the business, which I am pleased to confirm has continued since the period end.

We are actively targeting two large areas of opportunity within the U.S.: the Consumer Packaged Goods (CPG) market and the Loyalty and Personalised Promotions market. Progress has been particularly encouraging, winning new customers both direct and through partners, and taking those customers live increasingly quickly. The Group now has five clients in North America, accounting for 56% of the Group's ARR, demonstrating the strong progress being achieved in what is expected to be the world's largest digital promotions market, due to the huge value of promotions by CPG businesses.

Market opportunity and competitive strength

The overarching competitive strength of the AIR platform is its ability to deliver real-time loyalty i.e., personalised marketing messages to consumers securely, at an enterprise scale, via a multitude of channels, in real-time. This ability is resonating with retailers around the world, as they seek to accelerate their digital marketing strategies.

The global shift towards personalised digital marketing continues at pace, and we anticipate this will only accelerate in the face of tough economic times for consumers. Looking back at the 2008 financial crisis for example, coupon redemption increased by 23% from 2008 to 2009, with that momentum continuing well into 2011. Our customers recognise that loyalty and promotions are increasingly important in attracting and retaining consumers in periods of high real inflation.

While consumers look for promotions to assist them in reducing the cost of goods, so too do retailers use it to assist their financial positions. In McKinsey's "The State of Grocery Retail 2022" report, it was found that grocery retailers adopting personalised promotions with the right message and the right discount, through the right channel could result in gains of 2 to 3 percent in EBITDA.

Both of these financial drivers are added to by the desire of the consumer to receive personalised interactions from retailers. Recent consumer research by Adobe** found that "more than half (67%) of respondents say that, when shopping in-store or online, they would like to receive personalised promotions or offers based on their spending habits. Many consumers (61%) also say receiving these promotions will make them more likely to make a purchase."

In the face of huge upheaval and change, this is a clear demonstration that retailers globally have had to develop their omnichannel capabilities to address the rapidly changing consumer shopping behaviours and Eagle Eye has the ability to deliver such personalisation at scale.

* NCH research

** Adobe Commerce study (June 2022)

Increasingly differentiated offering for the US market

In the U.S., a key differentiator is AIR's ability to facilitate personalised digital coupons for CPG companies, who have traditionally spent heavily on paper coupons and are now looking to transition to more effective, personalised, digital offers. This move is popular with their grocery retail partners because it increases reasons for digital engagement. Through our partner, Neptune Retail Solutions, the Group has access to the CPG advertising budget, at over 45k+ retail outlets. The success of our first two joint customers, Southeastern Grocers and one of the largest national grocers in the U.S, provide us with compelling case studies with which to target this market.

Partnerships provide additional strength and access

Eagle Eye AIR has the ability to sit across the entire marketing ecosystem, connecting all the elements required to deliver personalised marketing at scale. As part of our growth strategy, we will continue to create partnerships and collaborations with other businesses in the industry, using their expertise to strengthen our offering and leveraging their marketing reach.

In the Year, we have deepened our relationships with key partners across the spectrum of the marketing ecosystem including Oracle Simphony, Neptune Retail Solutions and dunnhumby. We are pleased to have gained our Google Cloud Partner Advantage accreditation, which gives us access to Google's training, co-marketing and technical resources.

We have recently hired a Head of Strategic Alliances to develop our existing partner relationships and broaden our ecosystem of technology partners and systems integrators.

1. Delivering against our strategy

We successfully delivered across all three areas of our customer strategy in the Year - Win, Transact and Deepen.

· 'Win': bring more customers on to the Eagle Eye AIR platform;

· 'Transact': drive higher redemption and interaction volumes through the platform; and

· 'Deepen': encourage our customers to adopt more of our product portfolio as they become more adept at digital marketing.

We have won a substantial number of new customers across multiple geographies and benefitted from the accelerated ability to take these customers live while continuing to deepen our contractual relationships with existing customers.

Our high level of customer retention means that each new customer win significantly adds to our growth prospects, with revenue from our largest revenue-generating customers typically increasing by a multiple of over three times by the end of their third year on the AIR platform, through both increased use of the platform and the addition of new services.

Win

There was an increase in the win rate, both in the UK and internationally, resulting in an uplift in "Win" related revenue throughout the Year. New customer highlights in the Year include Halfords Group plc, for a customer engagement solution, and three new U.S. customers.

The increased win rate across our key geographies demonstrates the range of capabilities being delivered by the Eagle Eye AIR platform, with the ways in which businesses are using Eagle Eye AIR increasing at pace, providing us with a strong base for future expected growth. Securing these wins in the current economic environment, highlights how promotions are more important than ever and are increasingly becoming one of the most effective ways to drive increased trade.

The Group has an exciting new business pipeline heading into 2023, with a number of potential contracts coming from each key geography, which will continue to enable us to achieve sustainable and profitable growth.

Transact

Several significant customer contracts moved into the transactional phase during the Year. These included Woolworths in Australia, Staples US Retail and Virgin Red.

Positive developments in the final quarter of the Year also included the go live of personalised offers for Halfords Motoring Club and Waitrose. We continue to benefit from development work on the product to generate more turnkey solutions for our clients, often reducing the implementation time.

Chargeable AIR redemption and interaction volumes, a key measure of usage of Eagle Eye AIR, grew by 62% to 1.7bn (FY21: 1.0bn), primarily reflecting an increased number of loyalty transactions following the successful launch of new customer programmes.

Deepen

A key part of our strong performance this Year has been the considerable increase in use of the AIR platform by our existing customers, as reflected in the growth in NRR to 145%.  We have seen a significant increase in interest in our loyalty offerings, in particular, by our customers, such as Asda, Pret a Manger and Pizza Express, as they seek to retain their customers in the post-pandemic environment.

In the UK, we have been working closely with Asda since 2014 on back-office efficiency measures and are now excited to be selected by Asda for their new loyalty programme, Asda Rewards. Following a successful trial with Asda employees in September 2021, the programme has now launched nationally.

Further customer expansions include Pret A Manger with the expansion of the coffee subscription service into France and the U.S., as well as the launch of their loyalty scheme, Pret Perks, and the launch of a subscription service for Liberty Retail Limited.

We also launched a new loyalty programme for long-standing digital promotions customer, PizzaExpress. The PizzaExpress scheme is the first of its kind by a UK hospitality operator, using the AIR stampcard feature alongside our Digital Wallet to manage customers' personal stampcards and reward coupons.

We deepened our partnership with Mitchells & Butlers through the launch of a new project to gather data on different offer types used by customers whilst also helping to reduce fraud.

We saw some impact from COVID-19 recovery on our deepen revenue in the Year. NRR pre COVID impact is approximately 130%, which we anticipate to be a target level for the business moving forward.

Pleasingly, our long-term contract customer churn rate by value remains very low at below 1% with good levels of renewals taking place.

2. Innovation

Customer focused innovation has always been one of our core company values, spending 17% of revenue (FY21: 19%) on the product during the Year. It is fundamental to our success and central to how we will continue to succeed into the future.

During the past Year we have innovated to ensure that we can continue to meet and exceed the needs of our customers all over the world. This has meant a focus on platform speed and scale and product flexibility.

Platform speed and scale

A significant proportion of our work in the Year has been on continuing to extend our omnichannel POS Connect capability. POS Connect is our state-of-the-art POS solution which enables our clients to deliver highly personalised offers at huge scale without relying on their existing infrastructure.

For enterprise clients such as grocery retailers, their performance requirements are based on the number of people in their shops, the number of items in their basket as they checkout and the number of promotions available at any given moment to calculate what offers and rewards to which a customer is entitled. To minimise the time taken for customers checking out, our platform needs to be able to perform these calculations within milliseconds. Based on a basket of 50 items, we have increased the speed of these calculations by five times through our database design, cloud architecture and system design.

Product flexibility

We continue to deliver new capabilities all the time and offer many different promotional types which are available for use, out of the box. We have extended our Gamification services to deliver more engaging customers journeys that drive frequency and spend. Examples of retailers using gamification include Southeastern Grocers whose Rewards Boosters programme gives customers a boosted number of points for buying selected products within a defined timeframe and ASDA who have set customer missions to earn cashback. We continue to develop our gamification services as retailers looks for new and innovative ways to engage and reward customers and boost like-for-like sales.

We provide all our customers with the ability to flex the technology to enable them to deliver their own unique strategy whilst still maintaining a high level of standard functionality, typically between 80-90%. We believe this is a real differentiator for us in the market.

By making these improvements, we have been able to start engaging with our clients on delivering what we believe is the next generation of marketing - contextual personalisation. This means we can personalise the "when" as well as the "what" of every message.

Data and Reporting

We made solid progress during the Year through the launch of Eagle Eye Analytics, a solution which improves the way our customers track and measure the performance of their loyalty and promotional activities. Eagle Eye Analytics is built using Google's market-leading Looker data analytics platform and enables our clients to benefit from enhanced reporting and new features. We will continue to evolve our data and reporting capabilities in the coming year to ensure we deliver the future requirements of our customers.

Integrations and Partnerships

It is our mission to be the most flexible, scalable and future proofed promotions and loyalty platform in the world. In order to achieve this, we continue to invest in making it easier for retailers and their partners to work with us. We now have over 80 pre-built integrations with POS providers, eCommerce platforms, CRM systems, data analytics companies, payment providers and more, and will continue to engage with partners all over the world to ensure we are able to deliver the maximum value to our customers.

3. International growth

We are now clearly seeing the benefit of our investment into international expansion, with strong growth in North America and exciting prospects in our Australia operations, providing us with access to the Southeast Asian market.

North America

CPG offering in partnership with Neptune Retail Solutions

The CPG digital coupons market is a vibrant and highly active opportunity, where contracts are being put out for tender typically on a three-year cycle. These are high volume, pay per click opportunities for which we have developed a pre-packaged, rapidly deployed offering alongside our partner, NRS. Together we are revitalising and modernising how CPG companies can engage shoppers digitally through personalised promotions.

Since the signing of the first joint contract with Southeastern Grocers in 2019, the partnership has driven more than 200 million personalised offer recommendations monthly to Southeastern Grocers' loyalty programme members across all banners, and so we are excited about what our offering will bring to this large U.S. grocer. The success of the programme has elevated the profile of Eagle Eye in the U.S. market.

We were delighted to sign one of the largest national U.S. grocers at the beginning of the Year, the second customer to be secured alongside our partner Neptune Retail Solutions (NRS). Importantly, this grocer went live on the AIR platform in May 2022, just a few months after contract signing. Achieving deployment so quickly is a reflection of the investment we have made in this product where the market requires more of a turnkey solution, which enables a faster time to market for our customers, whilst generating recurring revenue quicker.

Loyalty and Personalised Promotions

We are also targeting our more traditional market of Loyalty and Personalised Promotions, of which Loblaw is a successful example. For these types of customer deployments, AIR is part of an extensive, complex ecosystem, requiring greater customisation and for which the flexibility of the AIR platform is ideally suited. These types of opportunities will have a longer sales cycle than CPG and will generally go-live in distinct phases.

In January 2022, we were pleased to announce that we have been selected by Giant Eagle, a regional food, fuel and pharmacy retailer and one of the 40 largest family operated companies in the US, to facilitate its new digital loyalty platform and to enable increased promotional capabilities.

In Canada, during the first half of the Year, we signed a three-year contract to extend our partnership with Loblaw Companies Ltd ("Loblaw") to power the PC OptimumTM loyalty programme. Loblaw is using Eagle Eye's AIR digital marketing platform as well as professional services to ensure ongoing innovation to deliver value to PC OptimumTM members.

The sales pipeline in North American market continues to expand, both directly and through partners, and presents an exciting opportunity for the Group. We continue to invest in our international capabilities to ensure we have the ability to deliver continued revenue growth.

Australasia

With two of the largest retailers in the Australasia region now customers, we are exploring the sales opportunity in the wider Asia Pacific region. The Group believes there to be a good level of enterprise prospects in the region.

Our significant five-year contract with Woolworths went live in August 2021 to the members of the Everyday Rewards loyalty scheme, just 10 months after contract signature. Our platform has already helped Woolworths to deliver several Everyday Rewards app enhancements including more personalised offers and real-time boosting of offers. This year we will begin work with Woolworths New Zealand, operator of over 180 Countdown branded supermarkets in New Zealand.

We continued our work with The Warehouse Group, one of the largest retailing groups in New Zealand. In January 2022, its largest retail banner, The Warehouse, went live nationally with an app-first loyalty programme, The Market Club. We continue to work with The Warehouse Group as it seeks to deliver more features to members of its fast-growing programme.

Eagle Eye was delighted to sign a contract with IKEA Indonesia in September 2022, post Year end, to provide its new personalised loyalty platform. IKEA Indonesia is a subsidiary of Dairy Farm International, the leading pan-Asian retailer.

Europe

Having tested the market within mainland Europe through targeted marketing activities, we are starting to see increased customer interest for our offerings in mainland Europe, both from existing and potential new customers, such as Cosmos in Greece, HMS Host in Netherlands, the expansion of our JD Sports relationship outside of the UK, Pret a Manger, VF Group, IMO and several others. Having carried out further analysis of the size of the enterprise retail opportunity, we will initially target the DACH (Germany, Austria, Switzerland) region, the largest economic region in Europe, placing a small Eagle Eye team in Germany alongside our partner network. We continue to explore additional opportunities to expand in the wider European region.

4. Better, Simpler, Cheaper

While investing in innovation and growing the business, we simultaneously look for inherent productivity and efficiencies coming from the scale of what we do. The relevance of this ethos came to the fore at the time of the COVID-19 pandemic, when the agility of the organisation enabled us to swiftly adapt to the changing working practices enforced by the pandemic and continues to be important as we navigate the current difficult macro-economic environment.

We have developed a proven business model to grow our EBITDA margin whilst also investing, as we 'Win', in sales & marketing and enhancements to the product to generate new opportunities for growth.

Our people costs represent 65% of the operating costs of the business in the Year (FY21: 64%) and we recognise they are our biggest asset. As we have moved through the pandemic and workforces have become more mobile, our business model has allowed us to use remuneration as one of the levers to reward and retain our best people. Continued investment into the new year is built into our plan, in line with the model we have developed. We aim to award pay rises across the organisation at least in line with the average levels of wage inflation to ensure we maintain our high levels of retention. We continue to review average industry wages and are comfortable we are well placed to manage any rises in the year ahead.

We have moved to a regional structure, with a VP in charge of each region, providing greater autonomy to make local decisions and champion our culture, which will be essential to maintain our agile ethos as we scale.

Our people and beliefs

Creating value for our customers sits at the heart of Eagle Eye and we believe this is the foundation of our successful business. We have an exceptional team creating value through market leading technology for some of the biggest names across the globe. We have a clear vision, mission, and purpose, and a unique 'Purple Method' of working that we believe enriches lives and, has the power to change the world for the better.  By collaborating with clients to deliver solutions that solve their pain points and to help maximise their return on investment, we secure customer loyalty. We have been tracking the value we create through our Customer Professional Services Satisfaction Reports introduced during the year and Employee Net Promoter Score, which is improving and is significantly higher than the industry benchmarks.

To bring our "Purple Method" to life, this year we also authored our own Eagle Eye book, The Purple Playbook, which has been gifted to every member of the team and will be given to every new starter as part of their welcome pack. It is part manifesto, part culture book, part employee handbook and part 'how we got to where we are!" Ultimately, its purpose is to celebrate everything and everyone that contributes to making Eagle Eye the fantastic organisation that it is today.

We celebrate the contribution of our people both at our Annual Company Conference and monthly by our Purple Awards. This year we have launched our "Purple Pathways" (career development) programme, which will support employees to develop their career at Eagle Eye and advance into new roles over time.

As part of our ongoing commitment to charity work, we partnered with 52 Lives, a charity built around the concept of 'kindness' who find people who need help and then deliver it. The Purple Places Challenge which we launched in FY22 was also a huge success; the challenge saw the team walk, run, cycle and row their way around the world, as part of our efforts to raise money for 52 Lives and we ran several more charity events during the year to support this. We are proud to have raised over £40,000 that has helped the lives of 16 people and their families.

In May 2022, one of the highlights of my year was receiving a 3-star accreditation rating from Best Companies. This is their highest accolade, which represents 'world class' levels of employee engagement. We employ over 170 staff and ranked number eight in the UK in the Technology sector, and number seven in the South East overall in their Q2 2022 survey. We are a business that places the success and happiness of its people at its heart. In responding to the survey, employees revealed they felt positive about the leadership and management at Eagle Eye, were happy with their work and home-life balance and 100% of employees felt proud of working at Eagle Eye.

This achievement comes after the implementation of a number of people-focused initiatives. In the last year we have strengthened our compensation reviews to incorporate loyalty and to reward people based on the value they bring. 

Several changes have also been catalysed by our 'Purple Women' initiative; including family-friendly policies that offer parents more flexible working patterns, enhanced leave packages, and additional support on their return to the work; together with education and support of health-related issues impacting employees.

Outlook

The prospects for Eagle Eye are increasingly positive and we have entered FY23 in a very strong position with considerable momentum across the business, with trading in the first few months of the Year in line with the Board's expectations. We have a considerable addressable market, high profile customers in multiple geographies, a proven offering and a high-quality business model driving growth in revenue, profits and generating cash. 

In the current difficult economic environment, customer loyalty and effective promotions are more important than ever. The retail industry is becoming increasingly aware that data driven, personalised promotions are one of the most effective ways to drive increased trade. The ability of our AIR platform to deliver 1:1 marketing, in real time, at an enterprise scale, means we are well positioned to address this growing customer need.

The Group continues to successfully manage inflationary pressures and the underlying growth and flexibility of the Company's business model mean that management can invest into the business and people with confidence to support future growth.

The Group's strong new business pipeline, and growing international opportunity in the US, Europe, and Asia, coupled with supportive market drivers, underpins the Board's confidence in the long-term success of Eagle Eye.

Tim Mason, Chief Executive Officer

Financial review

Key Performance Indicators

(1) Adjusted EBITDA excludes share-based payment charges along with depreciation, amortisation, interest and tax from the measure of profit and is reconciled to the GAAP measure of profit before taxation in note 5.

(2) Net cash is cash and cash equivalents less borrowings.

Group results

Revenue

Revenue growth for the Group was 39% for the Year (FY21: 12%), achieving growth in all areas of our customer strategy: Win, Transact and Deepen.

Professional services revenue increased by 30% to £7.6m (FY21: £5.9m). Under IFRS 15, a SaaS business will typically recognise revenue (including implementation revenue from professional services) over time. In some cases, implementation revenue is now recognised over the period the service is live. Therefore, during the period of implementation for a new client, which is typically between two and six months, no revenue will be recognised, although directly attributable associated costs are also spread over this period, matching revenue and costs. Revenue from professional services that has been deferred into future periods, but delivered and billed, was £3.0m at 30 June 2022 (30 June 2021: £1.0m).

The Group's Annual Recurring Revenue (ARR), which is our period exit rate for recurring AIR subscription and transaction revenue plus any professional services contracted for more than 12 months hence and secured new wins, excluding any seasonal variations and lost contracts, increased by 41% to £23.9m (FY21: £16.9m). The growth rate is higher than the overall revenue growth due to the securing of long-term professional services in some enterprise accounts, versus the comparative period.

The Group has a strong Net Revenue Retention (NRR) rate, which is the improvement in recurring AIR revenue excluding new wins in the last 12 months. It has improved in the period to 145% (FY21: 105%) due to successful deepening of existing accounts and the recovery in the Food & Beverage sector from the impact of Covid-19. Excluding the Covid-19 recovery impact, NRR for FY22 was 137%.

Chargeable AIR redemption and interaction volumes, a key measure of usage of the AIR platform, increased by 62% to 1.7bn (FY21: 1.0bn), slightly ahead of the 53% growth in recurring subscription and transaction revenue, reflecting the banded pricing model for some of our Enterprise clients which now make up a larger proportion of revenue following new wins during the year such as with the Group's partner, Neptune; deepening of existing relationships including with Asda Loyalty; and increasing transactional usage of the platform by clients such as South Eastern Grocers.

In addition to winning new business, including Giant Eagle, Halfords and a major US grocer, and deepening existing relationships, the Group successfully maintained an extremely low rate of long-term contract customer churn by value at 0.2% (FY21: 0.3%). This reflects the scale and breadth of the AIR platform in meeting our customers' needs.

As expected, SMS messaging revenue fell from the prior year but still generated revenue of £2.2m (FY21: £2.6m), reflecting some reversion of consumer shopping habits to their pre-pandemic state and the end of use of the Group's SMS messaging platform to support clients following the cessation of the UK Government's Test & Trace guidelines. However, SMS volumes continued to hold up well with those clients who recognise the benefit of an omni-channel strategy and which have integrated both their High Street stores and their eCommerce offering. Consistent with previous guidance, SMS is expected to continue to represent a decreasing proportion of the business in future years.

Gross profit

Gross profit grew 43% to £29.6m (FY21: £20.7m), with gross margin rebounding to 94% (FY21: 91%) following the impact of Covid-19 pandemic in the prior year and an underlying increase in gross margin from AIR platform revenues to 99% (FY21: 98%). The lower margin SMS messaging business accounted for 2% of gross profit (FY21: 4%).

Costs of sales includes the cost of sending SMS messages, revenue share agreements and outsourced, bespoke development work. All internal resource costs are recognised within operating costs, net of capitalised development and contract costs.

Adjusted operating expenses

Adjusted operating costs increased 41% to £28.9m (FY21: £20.4m) as the business has invested in line with our planned growth investment model. This cost represents sales and marketing, product development (net of capitalised costs), operational IT, general and administration costs.

The 45% increase in staff costs to £18.8m (FY21: £13.0m) reflected an increase in average headcount for the year which was up 15% to 162 (FY21: 141). In addition, there were increased annual pay awards reflecting the current competitive landscape and increased commission/bonus reflecting the increased new customer win rate and the Group's strong EBITDA performance. We continue to invest in developing our products, and in sales and marketing to support our growth plan; within staff costs, gross expenditure on product development increased to £5.2m (FY21: £4.3m) and sales and marketing spend was £3.7m (FY21: £2.8m).

IT Infrastructure costs grew ahead of recurring revenue growth by 57% to £6.5m (FY21: £4.2m) as the Group invested in infrastructure for its overseas regions in advance of significant increases in volumes seen towards the end of the year which were 15% higher at the end of H2 22 compared to the start of H2 22. Capitalised product development costs were flat at £2.2m (FY21: £2.2m), whilst amortisation of capitalised development costs was £2.3m (FY21: £2.2m). Contract costs (including costs to obtain contracts and contract fulfilment costs), recognised as assets under IFRS 15, increased to £2.7m (FY21: £0.7m), reflecting the high level of new wins during the year, and amortisation of contract costs was £1.3m (FY21: £0.6m).

Adjusted EBITDA and Profit before tax

The strong revenue performance and continued controlled investment spend have resulted in a significant increase in adjusted EBITDA margin to 20% (FY21: 18%) with adjusted EBITDA up 54% at £6.5m (FY21: £4.2m) for the Year. To provide a better guide to the underlying business performance, adjusted EBITDA excludes share-based payment charges along with depreciation, amortisation, interest and tax from the measure of profit. The GAAP measure of operating profit before interest and tax was £0.7m (FY21: £0.2m) reflecting the EBITDA profit achieved in the year, offset by increased amortisation and the non-cash share-based payment charge of £1.9m (FY21: £0.9m), reflecting the successful EBITDA performance this year and the strong position the Group is now in to deliver increased revenue and profits, which are reflected in future, performance related, vesting assumptions.

The profit before tax for FY22 of £0.7m (FY21: £0.1m) was up 444%, reflecting the improved profit before interest and tax and a reduction in net finance expense to £0.05m (FY21: £0.11m) due to lower utilisation of the Group's revolving loan facility, which was not utilised in the final quarter of the year and was undrawn at the Year end.

Profit after tax, EPS and dividend

The improvement in profitability during the Year has allowed the Group to forecast the recovery of taxable losses brought forward from prior years with more certainty which, along with the continued successful R&D tax credit claims, has helped reduce the effective tax rate of the Group during the Year, with an effective overall Group tax rate of 19% (FY21: 145%).

As a result, the Group declared a maiden full year profit after taxation of £0.6m (FY21: loss of £0.1m) and reported basic earnings per share improved to 2.12p (FY21: basic loss per share 0.22p) with diluted earnings per share of 1.86p (FY21: diluted loss per share 0.22p). No dividend is proposed (FY21: £nil).

The Board does not feel it appropriate at this time to commence paying dividends and continues to invest in its growth strategy.

Group Statement of Financial Position

The Group had net assets of £8.6m at 30 June 2022 (30 June 2021: £5.4m), including capitalised intellectual property of £3.5m (30 June 2021: £3.6m). The movement in net assets reflects the improved EBITDA performance in the Year and the exercise of share options during the year.

Current assets increased by £6.1m primarily due to revenue growth, aligned with an improvement in debtor days to 61 (FY21: 68 days) and higher EBITDA, generating cash in the Year. Liabilities increased by £4.1m primarily due to increased deferred income arising from the treatment of billed revenue for new implementation fees and professional services under IFRS 15, along with higher bonus and commission accruals, reflecting the revenue and EBITDA growth in the period, offset by the repayment of the Group's revolving credit facility during the year.

Cashflow and net cash

The Group ended the Year with net cash of £3.6m (30 June 2021: net cash of £0.8m) being better than the Board's prior expectations. During FY20, the Group made use of a number of COVID-19 linked schemes in order to manage its working capital, including the deferral of VAT and PAYE in the UK. As a result, £1.7m of cash outflow was deferred from FY20 to FY21 with a further £0.4m deferred to FY22 in line with agreed payment plans. All amounts have now been repaid. Stripping out the impact of these schemes, the underlying net cash inflow for the Year was £3.2m (FY21: £0.9m). Overall net cash inflow for the Year was £2.8m (FY21: outflow of £0.7m).

The main components to the net cash inflow (unadjusted for the impact of COVID-19 deferral schemes) were:

· the operating cash inflow of £7.4m (FY21: £2.4m), reflecting the EBITDA profit of £6.5m (FY21: £4.2m), a working capital inflow of £1.5m (FY21: £1.2m outflow), including COVID-19 deferral repayments, and net tax payments of £0.6m (FY21: £0.6m). The £2.9m improvement in working capital flow primarily arose as a result of increased income deferred under IFRS 15 and a higher bonus accrual reflecting the performance of the business in the Year;

· offset by capital investment in the AIR platform and other infrastructure of £2.4m (FY21: £2.4m), contract costs capitalised under IFRS 15 of £2.7m (FY21: £0.6m); and

· payments in respect of leases of £0.2m (FY21: £0.1m).

Banking facility

The Group has remained comfortably within its banking covenants which relate to the Group's debt ratio and adjusted EBITDA performance. During the Year, the Group entered a new £5.0m revolving loan facility with Silicon Valley Bank UK Ltd at a reduced cost, replacing its £5.0m revolving loan facility with Barclays Bank PLC. In addition to the new facility, the Group has an additional £2.5m available, subject to credit approval at the time. This provides the business with security and flexibility over its financing options to deliver on its growth aspirations. The Group's gross cash of £3.6m (FY21: £1.7m) and the undrawn £5.0m facility (FY21: £4.1m undrawn) gives the Group £8.6m of headroom, which the Directors believe is sufficient to support the Group's organic growth plans.

Lucy Sharman-Munday, Chief Financial Officer

Consolidated statement of profit or loss and total comprehensive income

for the year ended 30 June 2022

Consolidated statement of financial position

as at 30 June 2022

Consolidated statement of changes in equity

for the year ended 30 June 2022

Included in Retained losses is a cumulative foreign exchange profit balance of £513,000 (2021: loss £(69,000)).

Consolidated statement of cash flows

for the year ended 30 June 2022

Notes to the consolidated preliminary financial information

1 Basis of preparation

The financial information set out herein does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. The financial information for the Year ended 30 June 2022 has been extracted from the Group's audited financial statements which were approved by the Board of Directors on 20 September 2022 and which, if adopted by the members at the Annual General Meeting, will be delivered to the Registrar of Companies for England and Wales. 

The financial information for the Year ended 30 June 2021 has been extracted from the Group's audited financial statements which were approved by the Board of Directors on 21 September 2021 and which have been delivered to the Registrar of Companies for England and Wales.

The reports of the auditor on both these financial statements were unqualified, did not include any references to any matters to which the auditors drew attention by way of emphasis without qualifying their report and did not contain a statement under Section 498(2) or Section 498(3) of the Companies Act 2006.

The information included in this preliminary announcement has been prepared on a going concern basis under the historical cost convention, and in accordance with International Accounting Standards in conformity with the requirements of the Companies Act 2006 and the International Financial Reporting Interpretations Committee (IFRIC) interpretations issued by the International Accounting Standards Board ("IASB") that are effective as at the date of these financial statements.

The Company is a public limited Company incorporated and domiciled in England & Wales and whose shares are quoted on AIM, a market operated by The London Stock Exchange.

2 Going concern

As part of their going concern review the Directors have followed the guidelines published by the Financial Reporting Council entitled "Guidance on the Going Concern Basis of Accounting and Reporting on Solvency and Liquidity Risks- Guidance for directors of companies that do not apply the UK Corporate Governance Code".

The Directors have prepared detailed financial forecasts and cash flows looking beyond 12 months from the date of approval of these consolidated financial statements. In developing these forecasts, the Directors have made assumptions based upon their view of the current and future economic conditions that will prevail over the forecast period. A number of forecasts have been produced which take into consideration different assumptions on the timing and extent of recovery from Covid-19, including the risk of debtor default and the likely different recovery profiles of the different sectors in which the Group's services are offered.

On the basis of the above projections, the Directors are confident that the Group has sufficient working capital and available funds to honour all of its obligations to creditors as and when they fall due. In reaching this conclusion, the Directors have considered the forecast cash headroom, including the impact of the extension of the revolving credit facility with Silicon Valley Bank UK Ltd and the covenants associated with it, the resources available to the Group and the potential impact of changes in forecast growth and other assumptions, including the potential to avoid or defer certain costs and to reduce discretionary spend as mitigating actions in the event of such changes. Accordingly, the Directors continue to adopt the going concern basis in preparing these consolidated financial statements.

3 Segmental analysis

The Group is organised into one principal operating division for management purposes. Therefore, the Group has only one operating segment and segmental information is not required to be disclosed. Revenue is analysed as follows:

Continuing revenues can be attributed to the following countries, based on the customers' location:

4 Earnings per share

The calculation of basic earnings per share is based on the result attributable to ordinary shareholders divided by the weighted average number of ordinary shares in issue during the Year. The calculation of diluted earnings per share is based on the result attributable to ordinary shareholders divided by the weighted average number of shares in issue during the year, diluted for the effect of options being converted to ordinary shares. Basic and diluted earnings per share from continuing operations is calculated as follows:

5 Alternative performance measure

EBITDA is a key performance measure for the Group and is derived as follows:

6 Net cash

Net cash is a key performance measure for the Group and is derived as follows:

7 Report and Accounts

A copy of the Annual Report and Accounts for the Year ended 30 June 2022 will be sent to all shareholders in due course together with notice of the Annual General Meeting.