Boku (LON:BOKU), the world’s leading independent carrier commerce company, has today provided the following unaudited trading update for the financial year ended 31 December 2019.
The Group saw continued strong payments growth in H2 2019 which is now translating into higher levels of EBITDA due to the powerful operational gearing, together with revenue progress in its Identity division.
· Group revenue for 2019 is expected to be in the range of $50.0m to $50.5m (2018 $35.3m); an increase in excess of 42% on 2018
· Group EBITDA* is expected to be in the range of $10.0m to $10.5m (2018: $6.3m); showing an increase of over 59% on 2018
· The Company held approximately $35.6m in cash at 31 December 2019 (30 June 2019: $27.9m, 31 December 2018: $32.3m). The average daily cash balance, a measure which smooths out the effect of carrier and merchant payments, was $22.4m in December 2019 (June 2019: $22.2m, December 2018: $24.4m)
Boku Payments has had another very positive year with strong operational leverage coming through:
· Processed Value (“TPV”)** of $5.0bn for 2019 compares with $3.6bn in 2018. Growth was steady throughout the year with volume in H2 2019 $418 million higher than in H1 2019
· Monthly Active Users (“MAU”) of the Boku payments platform in December 2019 increased to 17.8 million, up 2.6 million from the half year and 4.4 million higher than December 2018
· Payments revenue is expected to be approximately $43.3m, an increase of 23% (2018: $35.3m) and approximately 87% of the Group total
· Payments EBITDA* is expected to be at least $15.0m, up 138% (2018: $6.3m)
· These results include $3.2m of non-recurring revenues that were in the Company’s guidance for 2019 which similarly impact payments EBITDA; underlying payments revenues are expected to show growth of 14% on 2018
· H1 2019 payments revenues included $0.4m of revenue which was recognised immediately under IFRS where previously recognition was monthly. This had the impact of increasing H1 revenues by $0.4m and reducing H2 revenues by the same amount
· Encouraging progress made on adding e-wallets to the Boku payments platform, primarily in Asia, alongside carrier billing – which represents an opportunity which could materially expand Boku’s total addressable market at minimal incremental cost
· The focus of 2019 has been to strategically plug in the new carriers demanded by lower margin, high volume accounts
The Boku Identity division was created following the acquisition of Danal Inc on 1 January 2019 for a final total consideration of $25.1m, as announced on 6 January 2020.
· Billable transactions increased by 45% to 253 million
· Identity revenues of $6.7m, up 26% on 2018 (2018: $5.3m pro forma)
· Revenue in H2 was impacted by local US supply headwinds
· Identity EBITDA* loss of $5.0m (2018: $6.4m pro forma loss)
· Transformation of Identity business from US-only to global business underway
· Building out of global silent, frictionless authentication Identity product in progress
* Adjusted EBITDA: Adjusted for stock option expenses, Forex gains/losses and Exceptional items
** TPV is the US$ value of transactions processed by the Boku platform
Jon Prideaux, Boku’s CEO, commented: “Our merchants hire us to help them acquire new paying users: during 2019 nearly 19 million end-users made their first transaction through Boku, helping our customers to drive their growth. Collectively our merchants generated more than $5.0bn of TPV through the Boku platform.
“Platform businesses have wonderful gearing. It took us a decade and more than $100m to build the Boku payments platform which now connects more than 190 carriers worldwide and most of the world’s largest digital merchants. We continue to make new connections — this year we concentrated our efforts on plugging in the new carriers demanded by lower margin, higher volume, transaction model merchants; in 2020 and beyond these connections will be reused for other, higher margin settlement model merchants. A revenue increase of 42% has translated into a more than doubling of payments EBITDA: a fabulous result.
“We are excited at the potential of e-wallets. In Asia, the leading m-commerce region, e-wallets are the dominant payment mechanism, eclipsing card-based payments. On the supply side we have made significant progress: further to the announcements about our partnerships with the GrabPay and GoPay wallets, we now have signed agreements with ten wallets with more than 1.4 billion customers in nine countries. By the end of 2020 we expect to have all the major wallets connected. Demand from our existing merchants is strong. As a competitively priced payment mechanism, wallets have the potential to materially expand our Total Addressable Market at modest cost, with extra margin generated flowing through to EBITDA. The early signs from GrabPay on small merchants are encouraging. The exact timing and quantum of these revenues is difficult to quantify and so have not been built into any forecasts. Nevertheless, we are confident that we will see a material revenue impact from e-wallets over the medium term.
“We made steady progress in 2019 with Boku Identity, with revenues increasing 26% and losses reducing. This US based revenue increase was achieved despite some headwinds from restructuring of the Identity management team and some supply side issues in the US. Demand from global companies for a secure and simple worldwide way of verifying users on mobile is plentiful, with six potentially transformative deals in the pipeline. Realising this potential needs global supply from non-US carriers on which we are expecting to make further progress in 2020.
“We look forward to reporting on progress with both divisions, along with our audited results, at the end of March 2020.”