Boku Inc (LON:BOKU), a global network of localised payment solutions, has announced its audited results for the year ended 31 December 2023.
An exceptional year of growth, driven by the addition of more digital wallets and account to account connections to our global network of Local Payment Methods, delivering revenue and EBITDA significantly ahead of initial expectations
Financial Highlights
| · | Revenues for the year up $18.9 million (30%) to $82.7 million (FY22: $63.8 million) | |
| o | 33% higher than 2022 on a constant currency basis* | |
| · | Full year revenues include $16.9 million from digital wallets and A2A connections, up 153% from $6.7 million in 2022, following increasing adoption these payment methods by Boku’s key merchants | |
| · | Adjusted EBITDA* of $25.8 million up $5.6 million (FY22: $20.2 million restated) at almost 32% adjusted EBITDA margin even after allowing for continued investment in Boku’s global LPM network and management’s decision to pay one-time non-contractual bonuses totalling $0.9 million to reward all staff for the Company’s exceptional growth in FY23. | |
| · | Profit before tax from continuing operations up 178% to $11.4 million (FY22: $4.1 million) | |
| · | Net profit after tax of $10.1 million (FY22: $4.3 million, which excluded the profit after tax from discontinued operations of $24.6m) | |
| · | Total Group cash was $150.9 million at 31 December 2023, up from $113.9 million at 30 June 2023 and $116.5 million at 31 December 2022. The Group is debt free. In FY23 Boku spent £7.9 million repurchasing 5,512,079 of its own shares under the share buyback scheme | |
| · | The average daily cash balance*, a measure that smooths out the effect of carrier and merchant payments, was $131.7 million in December 2023, up from $105.8 million in June 2023 and $98.8m in December 2022 | |
| · | Cash generated from operations before working capital movements during the year was $23.4 million (FY22: $22.0 million) | |
| · | Interest income increased to $1.9 million (FY22: $0.2 million) as interest rates increased and more funds were moved to longer term deposits | |
Following the disposal of Boku’s Identity division on 28 February 2022, the comparative results shown are for the continuing Payments division only.
Non-Financial KPIs
| · | 67.4 million Monthly Active Users (“MAUs”) of the Boku platform in December 2023 (December 2022: 52.3 million), a 29% increase | |
| · | 66.1 million new consumers made their first payment or bundling transaction with Boku during 2023 | |
| · | Total Payment Volume (“TPV”) of $10.5 billion in 2023, up 18% from $8.9 billion in 2022. On a constant currency basis*, TPV was 23% higher than 2022 | |
| · | Particularly strong growth in digital wallets and A2A connections: | |
| o | 76% increase in MAUs of digital wallets and A2A connections, to 6.7 million in December 2023 compared to 3.8 million in December 2022 | |
| o | New users of digital wallets and A2A connections increased 64% to 13.8 million in 2023 (2022: 8.4 million) | |
| · | Take rate increased to 0.79% in 2023 (2022: 0.72%) as a result of higher take rates from digital wallets and A2A connections, with H2 take rate of 0.81% (2022 H2: 0.74%) | |
| · | In 2023 Boku completed approximately 125 new payment launches with existing and new merchants including Google, Meta, Microsoft, Amazon, Disney, Netflix, Spotify, Samsung, Sky and EA Games, through Boku’s expanded global network of localised solutions. Of these launches, around half were for digital wallets and A2A connections. | |
*These represent alternative performance measures (“APMs”) for the Group. Refer to the Non-IFRS financial information section of Boku’s 2023 Annual Report for a glossary of the Group’s APMs, their definition, the criteria for how adjusted EBITDA is considered, together with definitions of abbreviations.
Stuart Neal, Chief Executive of Boku, commented. “These results demonstrate that Boku is in strong financial shape and poised to fulfil its potential to grow significantly in the world of Local Payment Methods, which now represent two thirds of all global online payment volumes. It is testament to our focus on delivering for our customers, combined with a clear long-term strategy, that we are expanding the relationships with all of our key global merchants, beyond our Direct Carrier Billing (‘DCB’) product, to now incorporate Digital Wallets and Account to Account (‘A2A’) schemes across the globe. 2024 has started strongly and with deals that are already in place, we have the ability to double the business over the mid-term, as previously stated, with additional value to be created from expansion into new verticals. I am beyond excited at the potential for growth in this business as we create the global network for localised payment solutions.”
Investor Presentation
The Company will provide a live investor presentation relating to the results via Zoom at 5.30 p.m. GMT today. The presentation is open to all existing and potential shareholders. Those wishing to attend should register via the following link:
https://us02web.zoom.us/webinar/register/WN_OccPOHOWQFCCVKfehEFuVQ
There will be the opportunity for participants to ask questions at the end of the presentation. Questions can also be emailed to [email protected] ahead of the presentation.
Chair’s Statement
Boku has seen significant change since the last Annual Report setting us up well for sustainable future growth.
Our revenue growth has accelerated considerably thanks to broadening our range of local payment methods. As a result of our strong operational gearing, we are thus seeing strong adjusted EBITDA growth and increasing cash balances. I am very proud of the team effort that has achieved this.
We expect this growth to continue so we have embraced important changes in our organisation and how we present ourselves to the world. As a result, we are confident we are in great shape to deliver the next phase of our growth.
Now I would like to comment on some of the changes. First, I would like to thank Jon Prideaux, who retired as CEO at the end of 2023, for his enormous contribution to Boku’s development. He was responsible for overseeing its growth over the past decade. Under his leadership, the Company has become an increasingly important player in the specialised payments world and he has built a team who perform with great skill and commitment and which has a culture to be admired.
When Jon shared his intention to retire it is fair to say the Board was very cognisant of the high regard staff and shareholders have for him in shaping our future plans. However, we were very fortunate to persuade Stuart Neal to return as CEO. He had been the CFO at the time of Boku’s flotation in 2017 and then migrated internally to run our Identity division. With his help, that division was sold in 2022 and Stuart went with it. Fortunately for us, he left Twilio Inc, the new owner, early in 2023 which meant we could invite him back. Not only do the Board, staff and many investors hold Stuart in high regard, but this meant we avoided the risk of hiring someone unfamiliar with Boku. To make for a smooth transition, Jon, as CEO, and Stuart, as CEO designate worked together for the second half of 2023 and we are delighted that we have achieved a smooth and seamless transition and pleased that Jon is remaining on the Board as a Non-Executive Director.
We are also about to see the retirement of Stewart Roberts at the AGM as Senior Independent Director and Audit Committee Chair. I would like to thank him for his support and willingness to challenge our approach and decisions. That and his deep financial knowledge and experience of the payments industry will be missed, and I would like to wish him the very best in the future.
Again, we had the good fortune to be able to fill Stewart’s roles from within our ranks. I am pleased that Charlotta Ginman, an existing Independent Non-Executive Director, has agreed to take on both of Stewart’s roles for which she is well qualified.
Turning to the overall Board composition, after the AGM we shall have eight Directors in total, two Executives and six Non-Executives, four of which (myself included) are independent. I am proud of the wide range of experience of our Non-Executive team which includes the payments industry, telecoms, internet, Far East operations, accounting, HR, customer experience, ESG and public company board exposure. This depth of experience is complemented by a wide range of personal backgrounds from different countries and cultures.
As well as handling changes in the internal Boku team, we have also changed our auditors to PwC and appointed Investec as our NOMAD with Peel Hunt staying in place as one of our two brokers. I am pleased to welcome the new advisers to our support team and to thank Peel Hunt for agreeing to continue with us.
Revenue and profit growth are crucial to Boku’s existence. However, we shall continue to pay close attention to each of the following:
| · | Relevance and resilience: Boku prides itself on its ability to satisfy customers’ demanding requirements to support their growth. As our merchants include many of the major western digital companies, with some of the largest platforms on earth, they demand the highest standards. |
| · | Compliance and service: As a payments company, we are proud of our ability to comply with regulatory requirements in the more than 50 countries where we operate. Compliance with regulations and high standards of customer service are central to our culture and are two of the secrets of our success. |
| · | Our people: We value all our staff and treat them with the respect and consideration they deserve. We have, and intend to retain, high levels of staff loyalty and diversity. The Boku culture is, in my opinion, one of the most attractive features of this business. |
We also welcome the recently revised QCA Code with which we shall comply. In particular, the Board has determined that all the Directors should be subject to an annual re-election starting this year at our AGM in 2024. To facilitate this, as a US incorporated company, we need to modify our constitution and the resolution for this will be put to shareholders at this year’s AGM.
In conclusion, we are a company with the highest standards of technical skills, customer service and integrity. This underlines why we continue to supply payment services to the world’s largest digital companies. Alongside this we have a culture which makes Boku an attractive place to work and allows us to hire and retain the very best staff wherever they may be based and whatever their backgrounds are.
In my opinion the outlook for Boku is extremely exciting. We have demonstrated through our impressive customer list that we have the skills to exploit changing opportunities in the payments world where demanding merchants are selling products to people in many countries with a wide range of regulations to adhere to. I expect to see our current rapid growth continuing, but I acknowledge the challenge of growing our staff at the pace we shall need. That is one reason our culture is so important to our future.
I remain extremely proud to be a member of the Boku team and would like to thank all my colleagues, Executive and Non-executive, for their continuing commitment to our exciting journey.
Richard Hargreaves
Non-Executive Chair
19 March 2024
Chief Executive Officer’s Report
I am delighted to present my first set of financial results as CEO of Boku, in a year where the business achieved significant momentum, as demonstrated by growth in monthly active users, total processed volume, revenue, EBITDA and cash balances. But the financial results are an output measure delivered as a consequence of a clear strategy and lots of hard work by Boku colleagues around the world.
Picking up the baton – A smooth transition
I wish to formally recognise the significant contribution made by Jon Prideaux, Boku’s CEO from 2014 to 2023, to these impressive results. It is true that financial results are a lagging indicator of strategic decisions and operational execution that happened in the past, and this is certainly the case with regards to our 2023 financial results.
The seeds of our current growth, specifically the ramp in Local Payment Method (“LPM”) revenues, were sown way back in 2018, when, post a solid IPO, Boku began to search for routes to longer term strategic diversification. The ongoing themes covered in this report began life some time ago and are now beginning to bear fruit. When Jon took charge of Boku, the Company had just over 100 staff, with revenues that were less than $20m annually and falling. It is testament to Jon’s belief, drive and undying optimism that the Company posted 2023 revenues of over $82m, which equates to growth of 30% between 2022 and 2023.
Taking up the baton from Jon was always going to be challenging. After all, for the past ten years, Jon and Boku have been synonymous. Fortunately, however, my previous stints in senior leadership roles at Boku, including my time as CFO, have given me a deep appreciation and sensitivity to what makes the Company great, the embedded culture, the drivers of success and the heritage in carrier billing…more on this later.
It was with the thoughts of a winning relay team in mind that Jon has taken great care to ensure the Boku baton has been placed firmly in my palm so that I can take the Company on to the next phase in our growth story. My appointment as CEO comes after a six-month transition period, during which time I had the pleasure of being able to spend time with many of the 416 incredibly talented Boku colleagues from all over the world, hear from our global merchants about what’s important to them and speak to many of our investors, including those who have been with us since IPO.
What I hear consistently from many of our key stakeholders is that they are excited about the future of Boku and the opportunity in front of us to establish ourselves as the number one global payment network for LPMs. Global-localisation will be the driver of growth in the payments industry over the coming years!
A Values Based Company
At the heart of our success are our incredibly talented people, who drive the business forward by embracing the company values – putting merchants first (with their end customers at front of mind), being ambitious, always collaborating and showing flexibility in how we operate. The Boku values are the cornerstone of how we do things, how we work with merchants to deliver world-class solutions and how we operate effectively as a globally distributed organisation. We are where our merchants need us to be.
We have strong momentum and proven product-market fit for our LPM payment network, which now incorporates both DCB and acceptance of local digital wallets and bank oriented A2A schemes. The challenge for Boku going forward is to ensure that we effectively scale the operations of the business in line with the size of the commercial opportunities that we have created for ourselves.
The acid test for LPMs – will DCB lead to Digital Wallets which will lead to A2A?
The question we asked ourselves was – can we take what we have learned from winning in the Direct Carrier Billing (DCB) world and win in the materially bigger ‘pond’ of cross-border payments? In addition to this, can we broaden our reach beyond digital products and make our network relevant to more merchants, more use cases, more segments?
The answer to both of the above questions has been a resounding YES. During the course of 2023, we broadened our partnership with ALL of our key global merchants beyond DCB and into LPMs. We have expanded our use cases from digital and gaming and into advertising, with broader e-commerce scheduled for mid-2024 launch.
We also witnessed significant inbound demand for marketing style services, that have seen Boku power consumer acquisition (bundling) programmes for the likes of Amazon Prime and more recently ComCast/Peacock’s NFL streaming campaign for the 2023/4 SuperBowl playoffs. Supporting the biggest live streaming event in the history of the internet, demonstrates the resilience and scale of our platform.
We have the proof points that we need to have every confidence in our mid-term strategy.
The Network effect
Success for any payments company comes from building a virtuous circle – adding more payment methods brings more connected consumers which attracts more global merchants which attracts more payment methods, and so on…
During 2023 we added 27 new connections to our network, which now totals around 300 LPMs. We also enabled 125 new payment launches for our merchants during the year.
Across our network, monthly active users (“MAUs”) continued to grow strongly by 29%, reaching 67.4 million in December, which included 6.7 million users from LPMs alone, growth of 78%.
The culmination of all of the above increases in activity across our network, led to Total Payment Volume (“TPV”) processed growing to $10.5 billion, an increase of 19% compared with 2022. This includes TPV in relation to DCB which grew by 19% and other LPMs (digital wallets and A2A) which grew by more than 250% over the period.
Our financial performance is predicated on more people using our network, combined with our ability to generate margin by being increasingly useful to our merchants. The fact that we have simultaneously grown TPV and margins in 2023 is especially pleasing as it tells me that, right now, we continue to add value for our merchants.
Outlook – Steady as she goes, the strategy is working
I am delighted to be taking up the reins of a company that I truly believe in, with the incredible momentum we are currently experiencing.
The future of Boku will be one of evolution and not revolution. 2024 will see the Company continue along its current path – helping our merchants to grow cross-border, bringing them more users by adding more local payment connectivity. To ensure that we can continue to provide best in class service to our global merchants, with growing volumes and growing complexity across our platform, we will be investing in back-office processing and automation capabilities, incorporating a focus on continuous enhancement of our banking, treasury and settlement capabilities, making life easier for many of our merchants when it comes to doing business globally.
We will continue to invest in those core capabilities that will provide enablers to achieving long term sustainable growth and ensuring success in the Big Pond of cross-border payments, an exponentially bigger market than where we came from.
As we expand and grow, we will continue to respect and value the culture that got us to this point and allowed us to win at DCB. It is those very DCB genes that have equipped us to successfully add digital wallets and A2A to our network of LPMs. Being creative, collaborative and ambitious enough to turn messy, complex and dis-aggregated technologies into harmonised engines for growth.
I would like to reaffirm my belief in the previously stated ambitions to double the business in the mid-term. If we get this right, Boku can be a rocket ship and to quote a Pixar classic “to infinity and beyond!!”
Stuart Neal
Chief Executive Officer
19 March 2024
Chief Financial Officer’s Report
Strong revenue and EBITDA growth driven by growth in Local Payments Methods
Group results
2023 was a highly successful year for Boku as we saw a 30% increase in revenues of $18.9 million to $82.7 million (FY22: $63.8 million). The primary driver of that success was growth of our connections to Local Payment Methods (“LPMs”) for our global merchant base but we also saw good growth from Direct Carrier Billing (“DCB”).
Adjusted EBITDA* also grew strongly to $25.8 million (FY22 restated: $20.2 million[1]), in line with revenue growth, and this was net of one-off non-contractual bonuses to all of our staff in recognition of the highly successful year, together with a significant increase in contractual executive bonuses related to overperformance against both budget and market consensus expectations at the beginning of 2023. It’s worth recalling that as we headed into 2023, market consensus expectations were revenues of $69.2 million and adjusted EBITDA of $22.9 million, so the actual over performance in 2023 was substantial. Group profit before tax from continuing operations for 2023 increased to $11.4 million (FY22: $4.1 million). Year-end cash balances increased considerably to $150.9 million (FY22: $116.5 million) even though we purchased £7.9 million of our own shares as part of our continuing share buyback programme.
Consolidated Statement of Comprehensive Income
Payments division (continuing operations)
Following the disposal of Boku’s Identity division on 28 February 2022 Boku now only has one division – Payments.
Boku’s Payments business was founded on Direct Carrier Billing (“DCB”) which enables end user customers of Boku’s merchants to charge payments to their phone bills, but our payments network has expanded in recent years to offer connections to offer other Local Payment Methods (“LPMs”) such as digital wallets and real time Account to Account (“A2A”) payments through its ‘mobile-first’ payments platform. These services are provided to many of the world’s largest digital entertainment merchants including Amazon, Netflix, Meta/Facebook, Google, Spotify, Microsoft and Sony.
In 2023 the Company performed strongly with revenues increasing to $82.7 million (FY22: $63.8 million) an increase of 30% and 33% on a constant currency basis, which in turn delivered increased adjusted EBITDA of $25.8 million (FY22 restated: $20.2 million[1]). Growth comes from both the existing merchant base and from adding new carrier and LPM connections to new and existing merchants.
Total Payments Volume (“TPV”) increased to $10.5 billion (FY22: $8.9 billion) while Monthly Active Users (“MAUs”) grew by 29% to 67.4 million (FY22: 52.3 million) and 66.1 million new users made their first payment or bundling transaction with Boku during 2023 (FY22: 56.7 million).
We saw particularly strong growth in digital wallets and real time A2A payments: Revenues of $16.5m up 152% from $6.7m in 2022 following increasing adoption of these products by our key merchants; a 154% increase in volumes processed, compared to 2022; a 76% increase in MAUs of LPMs, to 6.7 million in December 2023 compared to 3.8 million in December 2022, while new users of LPMs increased 64% to 13.8 million in FY23 (FY22: 8.4 million).
[1] Right-of-use assets were restated to prepayments in the year ended 31 December 2022, see note 2 for further details.
In 2023 Boku completed approximately 125 new payment launches with existing and new merchants including Google, Meta, Microsoft, Amazon, Disney, Netflix, Spotify, Samsung, Sky and EA Games, through Boku’s expanded mobile-first payments network. Of these launches, around half were for LPMs.
Our take rate increased to 0.79% in 2023, with H2 take rate of 0.81%, as a result of higher take rates from digital wallets which are all settlement model where we handle the cash and so charge higher fees. (FY22: take rate 0.72% with H2 at 0.74%).
We continued to invest in Boku’s mobile-first payments platform in 2023 as we further expanded our LPM capabilities and continued our investment in Boku’s regulated payment capabilities which now cover more than 60 markets where Boku is able to process regulated payments either directly or indirectly.
Adjusted Operating Expenses (continuing operations)
Adjusted operating expenses* for the continuing Payments business increased to $54.9 million (FY22: $41.8 million).
| restated[1] | |||
| Year ended | Year ended | ||
| 31 Dec | 31 Dec | ||
| 2023 | 2022 | ||
| $’000 | $’000 | ||
| Gross profit | 80,670 | 61,993 | |
| Adjusted EBITDA | (25,799) | (20,238) | |
| Adjusted Operating Expenses | 54,871 | 41,755 |
[1] Right-of-use assets were restated to prepayments in the year ended 31 December 2022, see note 2 for further details.
This was due to a number of factors including significant payroll increases due to high wage inflation in all locations and additional headcount as we continued to invest in building out Boku’s ‘mobile-first’ payments network globally. We also added capabilities in digital wallets and real time A2A payments globally, including a further expansion of our regulatory footprint by adding new licences and legal entities. These regulated payment capabilities now cover more than 60 markets.
The Group capitalised $5.4 million of internally generated intangible assets during the year compared with $4.9 million in 2022.
Discontinued operations (Identity division)
Following the disposal of Boku’s Identity division to Twilio on 28 February 2022 the prior year comparatives included in the consolidated statement of comprehensive income include the results relating only to the continuing Payments business. The Identity results are shown separately under “discontinued operations”. The final payment from Twilio was received in full on 9 September 2023. There was no gain or loss on disposal in 2023.
[1] Right-of-use assets were restated to prepayments in the year ended 31 December 2022, see note 2 for further details.
Adjusted EBITDA
Adjusted EBITDA for the full year 2023 was up 28% to $25.8 million (FY22 restated: $20.2 million[1]). This includes a one-time non-contractual bonus payment to all staff to recognise the considerable over achievement against budget and market expectations as well as contractual over performance bonuses to senior executives. In total these over-performance bonuses totalled approximately $2.0 million, which directly impacted EBITDA.
We continued our investment into expanding Boku’s mobile-first network but still managed to achieve adjusted EBITDA margins of almost 32%. Adjusted EBITDA is earnings before interest, tax, depreciation and amortisation, non-recurring other income, share-based payments expense, forex gains/losses and exceptional items.
Profit before tax from continuing operations
Profit before tax from continuing operations for 2023 was $11.4 million (FY22: $4.1 million). This can be broken down as follows:
| · | Gross margin increased to $80.7 million/98% (FY22: $62.0 million/97%). |
| · | Share Based Payments expense increased to $7.6 million from $5.2 million in 2022 as we grew our headcount. The Share Based Payments expense comprises the IFRS 2 charge and related National Insurance expense. Boku continued with its policy of offering all staff share based awards annually. RSU and stock option charges are spread over three and four years respectively, and in line with their vesting conditions, from the date of grant. Of the $7.6 million booked in 2023, $0.6 million was paid out cash (FY22: $0.3 million) (relating to NI), the remainder was non-cash. All comparatives are for the continuing Payments business only. |
| · | Depreciation and amortisation charges increased to $7.6 million (FY22 restated: $5.4 million[1]) |
| · | Foreign exchange movements resulted in a loss of $1.0 million (FY22: $0.8 million loss) mainly unrealised differences on the currency balances we hold. |
| · | No amounts relating to intangibles were impaired in the year (FY22: $1.3 million related to impairment of the Fortumo domain and ‘brand’ which was discontinued). See also intangibles section below. |
| · | Charitable donations were similar to 2022 at $0.3 million (FY22: $0.3 million). |
| · | Financing expenses fell to $0.3 million in FY23 (FY22: $0.7 million). These costs relate to interest and set up fees on leases and bank loans/overdraft facility. |
| · | Interest income increased significantly to $1.9 million (FY22: $0.2 million) as interest rates improved and we were able to move more funds onto longer term deposits. |
| · | A fair value adjustment credit of $0.1 million (FY22: charge of $3.47 million) in relation to warrants granted in September 2022 to a subsidiary of Amazon Inc, Amazon.com NV Investment Holdings LLC (see note 3). |
| · | Other income of $0.1 million (FY22: $0.8 million) related to income from Boku providing ongoing accounting services to Twilio following the sale of the Identity business to enable a smooth transition (also in FY22). This amount has been excluded from adjusted EBITDA as a non-trading, non-recurring item. These services to Twilio have now ceased. |
| · | Tax charge of $1.3 million in the year (FY22: $0.2 million credit). Please see Note 7 for details. |
[1] Right-of-use assets were restated to prepayments in the year ended 31 December 2022, see note 2 for further details.
Profit from discontinued operations, net of tax (comparative)
The 2022 comparative for profit from the discontinued Identity business of $24.6 million included a $25.2 million profit on disposal of Boku’s Identity business to Twilio on 28 February 2022 net of disposal costs and offset by the Identity trading loss for the two months to the end of February 2022 (see note 8).
Profit after tax
The Group reported a net profit after tax of $10.1 million for the period (FY22: $28.9 million, primarily driven by profit from the disposal of the discontinued Identity division of $24.6 million, excluding this profit on disposal, profit after tax was $4.3 million).
Consolidated Statement of Financial Position
| · | Closing cash balances were $150.9 million at the end of 2023 (including restricted cash balances of $33.5 million) up from $116.5 million on 31 December 2022 (including restricted cash of $17.0 million). Boku also has a Revolving Credit Facility (“RCF”) of £10.0 million with Citibank. At year end the RCF facility remained undrawn. |
| · | The average daily cash balance, a measure which smooths out the effect of carrier, digital wallet and merchant payments, was $131.7 million in December 2023, up from $105.8 million in June 2023 and $98.8 million in December 2022. |
| · | Deferred tax assets of $15.3 million were recognised at 31st December 2023 (FY22 restated: $15.5 million[2]). This restatement reflected an error in the usability of certain tax losses and future transaction volumes through its US and UK incorporated entities) and deferred tax liabilities of $182 thousand were recognised (FY22: $Nil). |
| · | From a working capital perspective, current assets exceeded current liabilities at 31 December 2023 by $64.6 million compared with $55.1 million[1] at the 2022 year end. |
| · | Intangible assets were $56.6 million as at 31 December 2023, compared to $56.2 million at 31 December 2022 due to year end revaluation into USD. The Payments CGU (cash generating unit) was assessed using discounted cashflows and determined that no impairment was required at 31 December 2023. Following the disposal of the Identity CGU in 2022 only the Payments CGU remains. |
| · | Goodwill and other intangibles were assessed for impairment and it was determined no impairment was required as at 31 December 2023. |
| · | Intangible assets are broken down as follows |
| 31-Dec | 31-Dec | |
| 2023 | 2022 | |
| $’000 | $’000 | |
| Goodwill | 42,183 | 41,733 |
| Other intangibles | 14,437 | 14,497 |
| Intangible assets | 56,620 | 56,230 |
[1] Right-of-use assets were restated to prepayments in the year ended 31 December 2022, see note 2 for further details.
[2] Deferred tax in the year ended 31 December 2022 was restated, see note 2 for further details
Consolidated Statement of Cashflows
During the year there was a net increase in the cash and cash equivalents of $33.4 million (FY22: $59.6 million), excluding the effect of foreign currency translations.
Cash from operations before working capital changes was $23.1 million broadly in line with prior year at $22.0 million, however we saw large increases in trade and other payables of $70.9 million (FY22: increase of $40.3 million) due to timing of payables to merchants as daily settlement to merchants of funds received from digital wallets was delayed over the Christmas shut down at the merchants’ request. This was largely offset by an increase in receivables of $53.0 million (FY22: increase of $12.3 million) for similar reasons as receipts from carriers and wallets were delayed. This situation largely reversed after year end when Boku paid funds delayed over Christmas to merchants and received the delayed funds from carriers and wallets.
We purchased £7.9 million (FY22: £1.6 million) of our own shares in 2023 to cover employee RSU awards and Amazon warrants, per notes 20 and 23.
Amazon contract and warrants
On 16 September 2022, an Amazon Inc. subsidiary, Amazon.com NV Investment Holdings LLC (“Amazon”), signed a multi-year agreement with Boku to connect to new Local Payment Methods in multiple geographies which validated Boku’s move into offering the new Local Payments Methods including digital wallets and real-time A2A payments via our expanded mobile-first network. In conjunction with the agreement, Boku entered into a stock warrant agreement with Amazon allowing them to acquire up to 3.75% (11,215,142 shares) of Boku common stock at 81.20p per share based on Amazon spend with Boku over a seven-year period. 747,676 shares of common stock vested immediately on the signing of the warrant agreement on 16 September 2022.
The warrant valuation resulted in recognition of a warrant contract asset of $2.0 million (FY22: $1.7 million) and a $5.5 million (FY22: $5.2 million) contract liability as at 31 December 2023. Please refer to Note 23 for full details.
Looking Ahead
In 2023 revenues grew $18.9 million to $82.7 million compared to growth of $1.0 million in 2022. That 2023 revenue growth was a significant achievement and we rightfully rewarded all of our staff with a one-off bonus to reflect the significant over-performance against our internal budget and external market consensus expectations at the start of 2023. This revenue success has seen similar percentage growth in EBITDA despite Boku also continuing to invest in its mobile-first platform in order to take advantage of the opportunities in Local Payment Methods worldwide, in particular Account to Account, as well as investment to allow Boku to scale to meet the significant transaction and cash processing volumes we expect to see over the next few years. In our Capital Markets Day in February 2023, I outlined how we believed Boku could double its revenues in the medium term and that in turn would result in an expansion of adjusted EBITDA margins once the heaviest investment phase was over – and with 30% revenue growth in 2023 we remain confident that goal is achievable and quicker than we imagined back in February.
We are pleased with the 2023 financial results and the substantial progress we have made and believe the Company is well positioned for 2024 to exploit the substantial opportunities it has. We look forward to the future with confidence.
Keith Butcher
Chief Financial Officer
19 March 2024
Strategic Report
Boku – Enabling businesses to unlock growth by freeing their customers to pay the way they want, wherever they are in the world
The world of payments is changing before our eyes.
Ever since the mobile revolution of the 1990s and the introduction of smartphones in the 2000s, across the world, consumers are choosing increasingly to manage their lives via apps (or ‘Super Apps’) on their mobile devices …and that, importantly, also includes how they choose to pay for goods and services. After 50 years of standardisation in payments, driven by global card networks, who offered a harmonised user experience aimed initially at face-to-face transactions via point-of-sale devices, the modern consumer is seeking something different: Payment choice and the familiarity of their local brands.
Enter the Local Payment Method (“LPM”) revolution
LPM is a broad term to capture a preferred domestic (or perhaps regional) payment type that is popular among consumers, but is not part of a globally harmonised payment brand, such as Visa or MasterCard. Included within this definition (but not exhaustively) are digital wallets, domestic Bank-run Account to Account (“A2A”) (real time payments) schemes and Direct Carrier Billing (“DCB”).
In a world now dominated by mobile commerce, the use of plastic cards seems a somewhat old-fashioned concept when it comes to completing a transaction, and relying on them excludes many people around the world from participating in global digital platforms. Payments are becoming an embedded part of the way in which companies attract, onboard, service and retain consumers. Global organisations are acutely aware of the need to offer payment choice as a means of accessing and retaining the largest pool of consumers in each individual country they choose to operate within. That’s where Boku comes in.
The problem for such large global merchants is how to access what are disparate and non-standardised LPMs. After all, the beauty of the card networks is that everything works the same, wherever you happen to be in the world. Standardisation is the key.
However, no two LPMs are the same; have the same technology; same way of operating; same APIs; same underlying commercial framework. To solve this, Boku has created a platform which connects to over 300 funding sources, creating a global network of LPMs to help many of the world’s largest digital merchants grow in territories where connecting to card networks simply isn’t enough. The Boku network offers merchants one simple API connection that provides a slick, tokenised payments experience for an end customer that allows for repeat transactions and subscriptions, irrespective of the underlying funding source. Put simply, Boku deals with the complexity of LPMs and harmonises connectivity for our global merchants and their customers.
Importantly, the shift toward LPMs is not just a developing markets phenomenon. Whilst it is true that, in certain countries, the emergence of LPMs has been to leapfrog the investment in card-based technology, driven by the need for respective governments to drive financial inclusion through rapid deployment of new payment technologies (India for example). In many developed markets (Italy, Sweden, Switzerland, Spain, China, Korea, to name a few) the rise of the digital wallet has been driven by demographic preference, the ‘Gen Z’ effect, whereby an entire generation is growing up with no affinity to plastic cards, but a high expectation when it comes to user experience and convenience. It is also reasonable to say that technology and regulation have been equally influential in instigating the rapid emergence of direct A2A banking payments, which allow for a wallet-style mobile experience, but with a direct link to a user’s bank account (ref UPI in India, PIX in Brazil, PromptPay in Thailand, Open Banking in the EU).
Why our merchants choose Boku – The bundle of services
At Boku, we see ourselves as a growth partner to our large global merchants and not merely a supplier of payment services. This tying of our own success to the success of our merchants ensures that our goals are mutual and clearly linked.
It may not be immediately obvious, even to those who study the payments landscape closely, but there is a subtle but important difference between the role of Boku and that played by more mainstream card (payment) processors. Over the past 20 years, the goal of the global payment processor has been to generate economies of scale through large M&A combinations and standardisation of product and processes, hinged around well-established protocols issued by the card networks (e.g. Visa and MasterCard). Boku, to the contrary, has been aggregating disparate local payment methods (and bank operated schemes) globally, creating a network that adds value by dealing with complexity and tailoring our offering to each of our large global merchants. In this arena, Boku’s focus is on customisation and specialisation.
Over the same 20-year period, LPMs have grown in popularity to now comprise over two-thirds of global online payment volume. (source: Worldpay]
The role of Boku is therefore threefold:
| 1) | ‘Before a transaction’ |
| To help our merchants to commercialise in places where customer payment choice is key to commercial success. Offering better payment choice also brings with it the opportunity for consumer acquisition. During 2023, Boku helped our merchants to add over 66 million new paying consumers through a number of targeted bundling and user acquisition programmes. | |
| 2) | ‘During a transaction’ |
| To create ‘effective simplicity’ by connecting to popular local payment methods around the world and then working with our merchants to build APIs that provide a frictionless user experience and consequently have the highest possible user conversion rate (payment success). | |
| 3) | ‘After a transaction’ |
| To move money, convert currencies and remit funds in multiple countries. Allowing consumers to pay in local currencies and enabling merchants to receive funds in whichever currency they wish. |
At the heart of our momentum is the incredible set of assets that have been created by Boku. Boku’s network now spans more than 70 countries and connects to around 300 LPMs, including over 240 Mobile Network Operators plus 52 digital wallets & local Banking (A2A) schemes. Supporting this technical infrastructure are licences to move money in over 60 countries worldwide, underpinned by banking facilities covering 34 currencies via 190 distinct bank accounts.
The Next Stages of Growth:
To capitalise on the significant foundations and momentum that we have created, the Company has identified a number of key strategic focus areas to ensure success over the coming years.
| · | Continued development of the LPM network | |
| o | Our heritage in delivering complex connectivity to mobile operator billing capability globally has created an expertise in-house that places the business in a unique position to be successful when it comes to connecting to local digital wallets and domestic bank schemes. We will continue to grow our global reach in line with demands of our merchants. | |
| · | Deliver Account to Account (A2A) payments for mobile commerce | |
| o | Banks around the world are investing $millions in developing ‘open banking’ style real time networks that are increasingly being used to power commerce – reference UPI in India or PIX in Brazil. This new style of payment methods comes with some added nuances – such as real time cleared funds and the requirement for direct scheme participation. | |
| · | Marketing via LPMs | |
| o | This may be the world’s fastest growing marketing channel. Boku’s network can now connect to seven billion standalone consumer accounts. That equates to a lot of eyeballs and a significant opportunity for our merchants to market services using Boku’s network. | |
| · | Expand Banking and settlement capabilities – moving the money | |
| o | To fully capitalise on the opportunity generated by the LPM network, Boku will be adding increasing value to our merchants by continuing to invest in our ability to process, reconcile, convert and settle funds globally. | |
‘You’re going to need a bigger boat!’
Of course, executing on all of the above is not straightforward or easy. There is a reason that many of the most successful payments companies in the world are themselves giant global organisations. Servicing a global payments network for large global companies requires scale itself, to efficiently connect demand and supply, authenticate, secure and process a material value of commerce through one centralised platform takes enormous corporate muscle.
To ensure that we continue to win in Direct Carrier Billing (“DCB”) and digital wallets, but also to press our advantage in emerging A2A commerce, Boku will be making strategic investments for long term growth in core back-end processing capabilities, driving automation in the back office, introducing sophisticated tooling for our engineers (including early exploration of AI), adding bench strength in our finance operations, governance and compliance teams whilst layering on dedicated customer success capabilities.
To get ourselves ready for the next period of expansion – it’s not sufficient to simply reach the ‘Big Pond’ of global cross-border payments – we have to win in the Big Pond! Boku is no longer a start-up, we are scaling up. To access the material opportunity provided by the world of local payments, the company is increasing scalability across all facets of the organisation – from sales & product, through to engineering, legal/regulatory & finance.
