Boku Inc (LON:BOKU), a leading provider of global mobile payment solutions, has announced the following unaudited interim results for the six months ended 30 June 2023.
Group Highlights
Financial Highlights
● Revenues up 26% to $38.2m in H1 (H1 2022: $30.3m) and up 32% on a constant currency**** basis driven by increasing transaction volumes from our major global merchants.
● Revenues include $7.2m from Local Payment Methods (‘LPMs) up 350% from $1.6m in H1 2022 following the launch of 15 new LPMs and increasing adoption of these products by our key merchants.
● Adjusted EBITDA* increased 28% to $12.2m in H1 (2022 H1: $9.5m) as a result of prudent cost control whilst continuing to invest in Boku’s mobile-first payment network.
● Group profit after tax of $2.3m (H1 2022: $28.0m which included the profit on the disposal of Boku’s Identity division of $24.6m).
● Group cash balances were $113.9m at 30 June 2023 up from $67.8m at 30 June 2022. Of this, approximately $54.4m is Boku’s ‘own cash’ with the balance being merchant cash in transit. The Group is debt free.
● The average daily cash balance*****, a measure which smooths out carrier collections and merchant payments, was $105.8m in June 2023, up from $63.3m in June 2022.
● Final ‘holdback’ payment of $5.6m received from Twilio after period end in full payment of the final balance of the sale of Boku’s Identity business in February 2022.
● In H2 2022 Boku commenced a ‘share buyback’ scheme to purchase its own shares to cover employee RSU awards annually so that the annual RSU awards are non-dilutive to shareholders. In the first half of 2023 Boku purchased 3,088,359 shares for a total consideration of £4,416,626.
Operational Highlights
● Continued significant growth in users and payments volume in H1:
o 32% increase in monthly active users*** (“MAUs”) in June 2023 to 61.2m (June 2022: 46.3m).
o 32.7m new users made their first payment or bundling transaction with Boku during the first half of the year.
o Total Payment Volume (“TPV”)** up 16% to $5.0bn (H1 2022: $4.3bn).
● Growth driven by strong performance from Local Payment Methods (“LPMs”):
o Total LPMs connected to the mobile-first network increased to 40 connections in 17 countries, up from 25 connections in 14 countries in June 2022
o MAUs***** of eWallets and Account to Account (‘A2A’) solutions increased 122% to over 4.7m in the month of June 2023, compared to the same month in 2022.
o New users***** of LPMs increased by over 100% to 6.3m in H1 2023 (up from 3.1m in the same period in 2022).
● Average take rate increased to 0.76% in H1 2023 from 0.70% in H1 2022 as a result of higher take rates from eWallets.
● Almost 50 new launches for Direct Carrier Billing (“DCB”), eWallets and A2A in H1 2023 with existing and new merchants including Apple, Amazon, Netflix, Sony, Spotify, Sky and Tencent. Launches took place in 27 countries across Asia, Europe and the Middle East; two thirds of these launches were for LPMs.
● Most of our biggest merchants now use Boku for the newer LPMs as well as DCB and we are confident of our ability to add more of the global tech giants to this line of business.
● ‘Mobile-first’ payments network expanded to reach over 7.5bn end user accounts, 46% of which are non-DCB.
● As announced previously on 4 July 2023, Jon Prideaux is to retire as CEO on 31 December 2023. He will -remain on the Board as a Non-executive Director. Stuart Neal, former CFO of Boku, will take over as CEO from 1 January 2024.
Jon Prideaux, Boku’s CEO, commented: “I am delighted with Boku’s performance in the first half and that strong performance has continued in the second half. All parts of the business are performing well, and ahead of our internal budget at the time of the capital markets day earlier this year. The triple digit growth from wallets and account to account payments now means that these newer payment methods have come from next to nothing this time last year to account for nearly 20% of our revenue. We traded at record levels in July and August. It is undeniable that our strategy is working well. As I prepare to move from an executive to a non-executive position, I have strong conviction that the Company will continue on this growth path under Stuart’s leadership. With more merchants poised to adopt the newer payment methods and strong momentum from existing live connections, the full year picture is looking very healthy. As a result of the strong trading conditions we are seeing, the Board now expects the Company’s performance for the full year to be slightly ahead of its previous expectations, and we reiterate the medium term guidance communicated at the capital markets day.”
Following the disposal of Boku’s Identity division on 28 February 2022 the prior year comparative Condensed Consolidated Statement of Comprehensive income includes revenues and Adjusted EBITDA relating only to the continuing Payments business.
* Adjusted EBITDA (Earnings before interest, taxation, depreciation and amortization): Adjusted for stock option expenses, foreign exchange gains/losses and Exceptional items. See reconciliation per the Condensed Consolidated Statement of Comprehensive income This is an APM
** TPV is the US$ value of transactions processed by the Boku platform and includes transactions from DCB, Bundling, eWallets and Account to Account payments. This is an APM.
*** Monthly Active Users (MAU) data includes all users who successfully processed a payment or had an active bundle during the last month of the period. This is an APM.
**** Constant currency calculated by applying the monthly average foreign exchange rates in H1 2022 to the actual H1 2023 monthly results. This is an APM.
***** Alternative Performance Measure (APM)
Investor Webinar
Boku’s management will be hosting an online presentation and Q&A session at 5.30 p.m. BST today, Tuesday 26 September 2023. This session is open to all existing and prospective shareholders. Those who wish to attend should register via the following link where they will be provided with access details:
https://us02web.zoom.us/webinar/register/WN_vhdCRQpoQRGN2H-W0VxBBQ
Participants will have the opportunity to submit questions during the session, but questions are welcomed in advance and may be submitted to: [email protected]
Chief Executive Officer’s Report
Boku had a successful start to 2023. The momentum that built throughout the previous year has continued. Revenue growth exceeded 30% in constant currency terms (26% at reported rates), up from 21% in the second half of the previous year (7% at reported rates) and 7% in the first half of 2022 (-1% at reported rates).
This growth has been driven by a more than 3X increase in revenues from Local Payment Methods (“LPMs”) such as mobile wallets and account to account based payments (“A2A”). These methods, rather than Direct Carrier Billing (“DCB”), are now the primary driver of our growth and strategic focus. What is particularly pleasing is that this LPM growth is not driven by any one particular customer or sector, but is broadly based across multiple merchants in games, digital advertising, music and video streaming, operating in about a dozen countries. Although we are pleased to announce that we are now live with Amazon in twelve wallets in five countries as we had anticipated, these connections are maturing and do not yet make a significant contribution to revenue – that is yet to come. Our global merchants continue to expand with us into new geographies and we are a trusted partner in their own expansion plans, providing access to ever greater numbers of customers worldwide.
The triple digit growth in LPM’s means that eWallets and A2A now account for almost 20% of total revenue. That this growth has not affected the performance in Carrier Commerce (comprising Direct Carrier Billing (“DCB”) and Carrier Bundling) has been encouraging too. Revenues from those methods grew at 12% on a constant currency basis (7% at market rates), with Carrier Bundling performance being particularly strong.
All the non-financial indicators are also up and to the right, flashing green: Monthly Active Users (“MAUs”) have grown by 32% to exceed 61m. New users – a good leading indicator – in the first half were up by 10% to 32.7 million, with bundling take up being particularly strong. Total Payment Volume (“TPV”) was $5 billion, up 16%. We continued our pace of delivery with around 50 new deployments covering Apple, Amazon, Netflix, Sony, Spotify, Sky and Tencent.
The Journey to the Big Pond
Back in our Annual Report for 2020, I talked about the feeling of trepidation that one gets as one starts at the big school. No longer the big fish in a small pond, you have to make your mark in a bigger pond. Back in 2020, it was an aspiration for Boku to step up and compete with much bigger payment companies. But wanting something and delivering on it are not the same thing. It is now clear that we have moved beyond aspiration: our investments are manifestly starting to pay off.
The Quiet Revolution in Payments
Back in 2020, somewhat unnoticed in North America and Europe, where most electronic payments were made using credit cards like Visa and MasterCard, a quiet revolution was happening in the way that people were paying for things online. The emergent middle classes in Asia, the Middle East, Africa and Latin America were buying online and using a bewildering array of different mobile wallets and account to account based payments methods to do so. And, since most people live in those regions, this fragmented set of new local payment methods (LPMs) collectively came to account for more than half of all online payments. Card usage had grown; the growth of LPMs was greater still.
Fast forward to today and we can see increased usage of non-card payments even in the card markets in the West. In the UK, many people use Faster Payments to pay their friends and tradesmen; they use Zelle or Venmo in the US for much the same thing. In Sweden, Swish, a mobile payment scheme launched in 2012 is used by more than two thirds of the population and is growing in popularity for purchases from merchants and in the Netherlands, iDeal, a bank based non-card payment method has long been the default online payment tool for the Dutch. In the future, the possibilities of Open Banking in the UK and the EU and the recently launched FedNow in the US could disrupt cards over the longer term. Cards are here to stay, but the era of card dominance is waning.
A substitute not an alternative
Card processors looked at these new payment types and called them Alternative Payment Methods. Boku realised that the billions of people who preferred to pay with Alipay, Dana or UPI or dozens of other mobile wallets or A2A based payment systems did not see them as an alternative to cards. They saw them as a better way to pay. These new payment methods were all that these consumers knew. Being mobile native, using the phone’s facial recognition as security and the camera to initiate a transaction from a QR code, seemed natural. It was the simplest, most secure way to pay. It was cards that looked antiquated.
The overlooked opportunity
As a DCB company, some payment companies looked at Boku as a bit of an oddity. DCB worked differently to the payment methods that they normally worked with. DCB was more expensive, settled more slowly, could only be used for digital products and had low transaction limits. Mainstream card processors choose to leave DCB alone, seeing it as an anomaly, a curiosity. They didn’t take us that seriously. But Boku understood that mobile network operators could be a valuable source of new customers and persuaded the world’s tech giants to adopt the service. Our focus on DCB won us a priceless asset: direct payment integrations to the world’s leading digital companies.
Transferable skills: better results, easy to deal with
It turned out that the capabilities developed to work in the fragmented world of DCB, where no two carrier systems were the same, perfectly equipped Boku for the similarly fragmented landscape of local payments. We developed the ability to optimise different connections so that they performed better and helped our merchants to recruit more users and sell more stuff.
If there is one universal law of business – at least in my experience – it is this: there is never enough IT resource. In every company on the planet, the management has to make decisions about which projects to prioritise and which projects don’t quite make the cut. We help to fix that. Critical to Boku’s success is that we are prepared to do reverse integrations to our merchants. Instead of having to deploy their engineers, our merchants can let the Boku team take some of the burden of connecting their system to the 7.5bn accounts that can be accessed through our Issuer network.
A winning formula
Our formula of being a specialised payment company processing only LPMs for the world’s largest digital companies has proved to be very compelling. Most of our biggest merchants – Amazon, Spotify, Netflix, Meta, Tencent – use Boku not just for DCB but also for the newer LPMs and I am increasingly confident of our ability to secure at least some of the wallet and A2A business of other tech giants as well.
A race without end
Business is often described as a race. But that, in my view, is a poor analogy. Races have an end. A defined endpoint. A time when we can say who won, who lost and by how much. If business is a race, it is a race without end. We do report on our progress every so often, but our value is as much about the expectation, the promise of the future, as it is on past results. But careers do have an end: in 2024, the fifteen-year journey that I have travelled with Boku culminating in being CEO for nearly a decade is to end. I will pass on the baton in the continuing relay race to Stuart Neal. He has a long career in payments, including at both Barclaycard and Vocalink. He understands the company’s culture. I am confident that he will be able to take the company forward to new heights.
Growth: a longer perspective
During my time with Boku, we have seen tremendous growth in our business. Annual TPV has grown from less than $100 million to a $10 billion run rate. The average number of monthly active users has grown from 1.4 million to exceed 60 million. Monthly transactions processed now exceed 100 million, up from around 2 million. The Company has become profitable and cash generative. Business is a team sport and the job of the CEO, in large measure, is to pick the team and take credit for other people’s work. I have been blessed to work with many talented people and those people will continue, alongside Stuart, to help drive the Company’s fortunes forward. In a very real sense, the true measure of a CEO’s tenure is not to be seen in the numbers and percentages achieved during his time at the helm but, rather, from how the Company performs after he has departed.
Outlook
As I move from an executive to a non-executive position, I continue to believe that Boku’s best days are ahead of it. With the strong momentum that we currently enjoy, our relationships with merchants and expertise in optimising specialised payment types, the opportunities presented by A2A and the leadership provided by Stuart and the rest of the management team, I have strong conviction that the company will continue to go from strength to strength and achieve the targets set out at our capital markets day..
Chief Financial Officer’s Report
The first half of 2023 saw extremely strong performance with revenues up 26% to $38.2 million (and up 32% in constant currency) as we started to reap the rewards of our investment in moving into Local Payment Methods for global merchants, and a 28% jump in Adjusted EBITDA to $12.2 million as the operating leverage inherent in our model came through.
These results were underpinned by a 32% increase in monthly active users to 61.2 million in the first half (H1 2022: 46.3 million) as we continue to add connections for our global merchants to new payments methods and into new geographies. 32.7 million new users made their first payment or bundling transaction with Boku during the first half of the year.
We completed more than 50 new launches for DCB, eWallets and A2A in H1 2023 with existing and new merchants including Apple, Amazon, Netflix, Sony, Spotify, Sky and Tencent. Launches took place in 18 countries across Asia, Europe and the Middle East; two thirds were for LPMs. These drove a 16% increase in Total Payment Volume (“TPV”)** to $5.0 billion (H1 2022: $4.3 billion).
Much of the strong revenue growth in the first half was driven by the exceptional growth in LPMs, including eWallets and A2A, where revenue increased 350% to $7.2m up from $1.6m in the first half of 2022. Monthly active users increased 122% to over 4.7 million in June 2023, compared to the same period in 2022. New users of LPMs increased by over 100% to 6.3 million in H1 2023 (up from 3.1 million in the same period in 2022). Our ‘mobile-first’ payments network expanded to reach over 7.5bn end user accounts, 46% of which are non-DCB.
Financial review
Following the disposal of Boku’s Identity division on 28 February 2022 the prior year comparative Condensed Consolidated Statement of Comprehensive income includes revenues and Adjusted EBITDA relating only to the continuing Payments business.
Group Condensed Consolidated Statement of Comprehensive income to Adjusted EBITDA*
Revenues increased by 26% to $38.2 million (H1 2022: $30.3 million) and up 32% on a constant currency basis, with Adjusted EBITDA* increasing 28% to $12.2 million in the first half (H1 2022: $9.5 million) reflecting the strong revenue growth combined with our continued planned investment in our mobile-first payments platform. Gross margins for the continuing Payments business remained at 97% (2022: 97%).
Average take rate (revenue divided by TPV) increased slightly to 0.76% as a result of higher take rates from LPMs. Our merchant relationships and connections remain highly ‘sticky’ and as a result, since IPO, Boku has not lost a material merchant.
Adjusted operating expenditure***** increased as per our stated strategy, as we invested in our expanded ‘mobile-first’ payments network, which now includes eWallets and A2A, with planned increases in operational headcount and sales and marketing spend as Boku moves into new markets. However, the operational leverage inherent in our platform business remains strong and, as a result, we expect Payments Adjusted EBITDA* margins to increase over the medium term as outlined in our Capital Markets Day presentation in February this year.
Adjusted Operating Expenditure (Payments only)*****
| Unaudited | Unaudited | |
| Period ended | Period ended | |
| 30-Jun | 30-Jun | |
| 2023 | 2022 | |
| $’000 | $’000 | |
| Gross profit | 36,858 | 29,379 |
| Adjusted EBITDA* | (12,216) | (9,506) |
| Adjusted Operating Expenditure | 24,642 | 19,873 |
Identity division (discontinued)
Boku’s Identity division was divested during the first half of 2022 to Twilio. We received the final indemnity holdback payment from Twilio in full on 05 September 2023 and there are no further balances due.
Group Operating Profit (from Continuing Operations)
Group operating profit for H1 2023 was $2.1 million compared to $4.1 million for the same period in 2022. This can be broken down as follows:
● Other income of $0.1 million relates to income from providing ongoing accounting services to Twilio following the sale of the Identity business in February 2022 to enable a smooth transition. These services and associated fees ended in April 2023. This amount has been excluded from Adjusted EBITDA* as a non-trading, non-recurring item. The H1 2022 comparative of $0.4 million also related to the provision of the same services to Twilio.
● Gross margin increased to $36.9 million (H1 2022: $29.4 million) with gross margin percentage stable at 97% (H1 2022: 97%)
● Depreciation and Amortisation charges increased marginally to $3.1 million (H1 2022: $2.7 million)
● Share Based Payments expense increased to $4.0 million in H1 2023 from $1.9 million in H1 2022 primarily because the number of share awards increased in line with our increased staff headcount and the effect of a of a National Insurance accrual as a result of the lower share price at that period end. Boku has a policy of making annual RSU awards to all staff which vest in full after three years. These share awards are planned to be satisfied from treasury stock as part of Boku’s share buyback programme. See Consolidated Statement of Financial Position and Condensed Consolidated Statement of Cash Flows section below.
● Foreign exchange movements resulted in a loss of $3.13 million made up of realised and unrealised losses primarily on revaluation of non USD balances during the period (H1 2022: $0.06 million gain)
● Exceptional Items in the period were $0.018 million credit which relates to the fair value movement at the period end in relation to the Amazon warrants (see note 7) (2022: expense $1.26 million). The 2022 comparative period charge related to the impairment of the intangible relating to the Fortumo ‘brand’ which was discontinued in that period. There were no Amazon warrants at 30 June 2022 the comparative prior period end.
● Financing expenses decreased to $0.15 million in H1 2023 (H1 2022: $0.52 million).
Net Profit after tax
● The Group reported a net profit after tax of $1.8 million for the period (H1 2022: $28.0 million which was primarily driven by profit from the discontinued Identity division of $24.6 million).
Condensed Consolidated Statement of Financial Position and Condensed Consolidated Statement of Cash Flows
● Group cash balances were $113.9 million on 30 June 2023 up from $67.8 million on 30 June 2022 and slightly down from 31 December 2022 of $116.6 million. The Group is debt free.
● The average daily cash balance, a measure which smooths out the effect of carrier and merchant payments, was $105.8 million in June 2023, up from $98.8 million in 31 December 2022 and up from June $63.3 million in June 2022..
● In the second half of 2022 Boku commenced a ‘share buyback’ scheme to purchase its own shares to cover employee RSU awards annually so that the annual RSU awards are non-dilutive to shareholders. In the first half of 2023 we purchased 3,088,359 shares for a total consideration of £4,416,626.
● Intangible assets
| Unaudited | Audited | |
| Period ended | Period ended | |
| 30-Jun | 31-Dec | |
| 2023 | 2022 | |
| $’000 | $’000 | |
| Goodwill | 41,978 | 41,733 |
| Other intangibles | 15,204 | 14,497 |
| Intangible assets | 57,182 | 56,230 |
We assessed our goodwill and other remaining intangibles for impairment and deemed that there were no indicators of impairment at 30 June 2023.
● Deferred tax asset
During the course of our change in auditors to PWC, it was identified that there was an under-recognised deferred tax asset from prior years. Accordingly, the opening balances in the Condensed Consolidated Statement of Changes in Equity for years ended 31 December 2021 and 31 December 2022 have been restated. Please see note 9 for full details.
Principal Risks and Uncertainties
Since the end of 2022, the Board have been monitoring and mitigating the effects of global events on the Group’s business, including the global macro-economic environment, inflation and the cost of living crisis across Europe and believe the principal risks and uncertainties facing the Group remain consistent with the Principal Risks and Uncertainties reported in Boku’s 2022 Annual Report. Boku is an international business operating in 92 countries so any risk is spread and to date Boku has seen no discernible impact from the macro-economic environment. Boku charges a percentage of its merchants’ transaction value, so as its merchants’ increase prices, Boku’s revenues increase.
Going concern
In reaching their going concern assessment, the Directors have considered the foreseeable future, a period extending at least 12 months from the date of approval of this interim financial report. This assessment has included consideration of the forecast performance of the business, as noted above and the cash and financing facilities available to the Group. Considering all this analysis, the Directors are satisfied that the Group has sufficient cash resources over the period of at least 12 months from the date of approval of the condensed consolidated interim financial statements. As such, the condensed consolidated interim financial statements have been prepared on a going concern basis.
Looking forward
These results show that Boku’s strategic investment into adding connections to Local Payment Methods globally for our major international digital merchants is paying off and we expect the strong growth we have seen in the period to continue. This has resulted in a strong return to Adjusted EBITDA growth as a result of the operating leverage inherent in our platform business.
Keith Butcher
Chief Financial Officer
25 September 2023
| * | Adjusted EBITDA (Earnings before interest, taxation, depreciation and amortization): Adjusted for stock option expenses, Foreign exchange gains/losses and Exceptional items. See reconciliation to profit per the income statement |
| ** | TPV is the US$ value of transactions processed by the Boku platform |
| ***** | Adjusted operating expenditure is Gross Profit less Adjusted EBITDA |
Cautionary Statement
Boku has made forward-looking statements in this financial information, including statements about the market and benefits of its products and services; financial results; product development plans; the potential benefits of business relationships with third parties and business strategies. The Group considers any statements that are not historical facts as “forward-looking statements”. They relate to events and trends that are subject to risk and uncertainty that may cause actual results and the financial performance of the Group to differ materially from those contained in any forward-looking statement. These statements are made by the directors in good faith based on the information available to them and such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors underlying any such forward-looking information.
