Boku Inc Q&A with CFO Stuart Neal (LON:BOKU)

Boku Inc.

Boku Inc (LON:BOKU) Chief Financial Officer Stuart Neal caught up with DirectorsTalk for an exclusive interview to discuss what the company does, their latest trading update, the benefits that’s attracting retailers & carriers and the trading outlook for the next financial year.


Q1: Now, Boku floated in November of last year, can you remind us what the company does please Stuart?

A1: Put very simply, we enable customers to pay for digital goods and services by allowing them to charge them to their mobile phone bill and the reason that we can do that is that we have connections into the world’s largest mobile phone companies, around 170 in total in 50 countries.


Q2: You said in the trading update that Boku saw continued growth in all key metrics during 2017, how has the company achieved this growth?

A2: I guess at a high level there’s a long-term trend towards a rapid increase in the market of digitally distributed content so you’re talking app stores, digital music, downloads of various description, software and we very much play in that space.

We support some of the largest digital companies around the world and we help them to distribute their content by connecting them to the new customers and we do that with our connections, again, with the mobile phone carriers.

So, we work with companies like Microsoft Corporation (NASDAQ:MSFT), we work with Apple Inc (NASDAQ:AAPL), we work with Sony Corp ADR (NYSE:SNE), we work with Spotify, they’re all significant digital players and they’re growing in their own rights. We help them to grow and we grow alongside them.


Q3: You mentioned that you’re expecting to be EBITDA-positive for the second half of 2017, that’s a great achievement but what does it mean for the company?

A3: We’re really pleased, it is a significant achievement. We play in the payments space and one of the nice things about being in a payment company is there is a significant investment in building a scale platform and there’s quite a bit of money that goes into build that capability and it’s upfront investment and the beauty of it is once you’ve scaled it, you can bring on vast amounts of payment volume.

We did mention within our trading update that we’d trebled our payment volume through the platform to 1.7 billion in 2017 and we do that because we’ve got the biggest scale platform of our kind in the industry. That means that once you get to a point where the scale that you have is driving revenues that are now covering your costs, your costs are largely fixed so you get to a point where you are EBITDA-positive and then beyond that to being profitable and cashflow-positive, you start generating nice amounts of cash. So, the beauty of payment companies, and you’ll see how some of them have performed in the markets, is that they do become hugely cash generative.

Once we’ve become hugely cash generative, of course, that gives you options in terms of how you invest that money to further your growth downstream and so one of the things that we’ll certainly look to once we get to that point is what we can do to add to the product set to drive the revenues in 2019/2020 and beyond.

So, EBITDA-positive is an important first step towards driving and fuelling that growth in the future.


Q4: Monthly active users of the platform exceeded 8 million in December 2017, that’s a 140% increase over the same period for 2016. What are the benefits attracting retailers and carriers when consumers pay via the Boku platform?

A4: It comes back down to what we really do for our customers. In a standard payment model, take a typical Visa or Mastercard or even PayPal, the main primary function of those organisations is to basically move money, to take money from a consumer’s bank and pass that money to a merchant when a transaction has happened.

We do that for some of our customers but actually the really important role that we play is that we actually attract new users to the merchant. So, carriers are sitting on populations of consumers, whether they have a pre-paid phone or post-pay phone, and in certain markets actually people do have a prevalence for using credit or debit cards online, either they just don’t want to or because they can’t so Boku introduces those users to the merchants. We sit within the payment checkout or sitting behind an account online and as soon as the consumer discovers that they can charge to their phone bill they will sign up to a digital service. We have some evidence that suggests that there is an uplift in consumers subscribing to a service just purely because of the convenience of being able to pay using Boku.

So, in essence, what we do is we attract new customers for merchants and that fuels the whole growth that we’re seeing.


Q5: So, what are the main focus areas for the company in the next few months?

A5: For the next few months we have to continue what we’ve been doing so well and that is working with our existing customers, executing roll-out plans and continuing to create new relationships between carriers in a given market and merchants. We work with our clients, we follow them in terms of their plans for expansion and we have to continue to do that, that’s an absolute given.

We also maintain our focus around getting to a cash positive position and in our world, there’s not a huge difference between EBITDA and cash and so we’re maintain a focus on that so that’s really important.

Of course, on top of that, we want to start thinking about how we continue to grow, whether that be through organic expansion through the existing products there or making some sensible investments in new products, we’d like to put a bit of thought towards that too.


Q6: How is trading going and what’s the outlook like for Boku for the next financial year?

A6: Trading is good, clearly I won’t give some specific numbers, but you’ll see from our ’17 trading update that what’s driving our growth is the fact that we are still bringing new consumers to the retailers we support and as long as we do that, you end up with growth curve layered upon growth curve.

We have new carriers that are connected to the network, they bring new consumers, that’s one growth curve. The consumers that have already been signed up through the carrier, they take a while to discover the option to use Boku, there’s another growth curve there. You then have the consumers that have discovered Boku, but they use it more often and spend more when they’re online, that’s another growth curve. So, we like to see that this sort of growth in our revenue will continue by continuing to do what we’ve been doing well.

On top of that, I would say that we have a ruthless focus on our expenditure, so we invest sensibly and wisely on the right things and otherwise we do a good job of being as efficient as we can be with our OPEX.

So, we absolutely want to get to this point where we are starting to generate cash, we start to give ourselves options in terms of future growth and trading is continuing as we exited last year so we’re very positive about that.

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