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Boku Inc Q&A: Strong start to the year (LON:BOKU)

Boku Inc (LON:BOKU) Chief Executive Officer Jon Prideaux caught up with DirectorsTalk for an exclusive interview to discuss their latest trading update, how growing volumes & users translates into revenue and how the Coronavirus has created new trends for the company.

Q1: You’ve just announced a positive trading update, indicating a strong start to the year. Can you just remind our listeners what Boku does and its business model?

A1: So, we’ve put together a network of mobile network operators around the world, about 190 in about 60 countries, and the core business that we run through that network and the platform that we have allow people to buy things and to charge that to their phone bill. The type of customers that take advantage of that are companies like Netflix, Spotify in terms of streaming video and music respectively but also app stores and games in particular. It’s really the whole gamut of people doing stuff on their phones, all the digital content is bought and paid for through to their phone bill.

We also have an identity business which allows you to simplify the process of authenticating yourself online using those same connections.

Q2: We’ve seen growing volumes and number of users going through the Boku platform, can you explain how this translates into revenue for the company?

A2: One of the key performance indicators that we talk about is a so-called ‘total payment volume’ so that is the amount of value that users of our customer services like Netflix or Apple, what they’re buying, how many subscriptions they undertake. So, that’s a real key indicator for us, the total payment volume and our revenue is basically a share of that. We take a percentage, we take a bigger percentage if we provide a full service stack, we take a lower percentage if we are simply providing technical connectivity. The raw material that translates into revenue for the company is the value processed through our system.

On a more fundamental level, that’s underpinned by the number of users so obviously, users undertake a certain number of transactions. So, the two things we track really closely are monthly active users, or even daily active users, and then the value that they are transacting so called ‘total payment volume.

Q3: Now, everyone is obviously currently concerned about Coronavirus, but there appears to be some trends that Boku is actually benefiting from? Can you tell us about that?

A3: When we put out the trading update, we were able to report that we did $966 million worth of volume in the first two months this year and that’s 30% up to the same period last year. I think what’s quite interesting about that is that increase has somehow accelerated a little bit into February from January.

So, if you look at the amount of volume done per day, that’s up 2.5% in February compared to January, looking at the number of daily active users, that is 4% higher in February than it is in January.

The curious thing about this is it somehow correlated with the country being more affected by Coronavirus, it’s probably a bit early for me to draw a definitive cause or link but if it was the case then it would be kind of obvious. If people are self-isolating and spending more time indoors, it’s sort of obvious that they’ll spend more time playing on games and watching Netflix and the like.

This is very much in a pattern that we’re seeing in China, we don’t ourselves operate within China but there’s lots of reports showing that downloads of mobile apps went up by about 40% in the first 2 weeks of February when the virus hit and a lot of people were stuck at home. That 40% increase in downloads compared to the whole of 2019 shows that in principal, although obviously we are very concerned for the people affected by the virus, it’s also worth saying one of the things that people self-isolating at home will do is likely play more games and if it happened, would be good for our business. There does appear to be some evidence of that happening on the basis of the information we’re releasing on this trading update.

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