Boku Inc share price, company news, analysis and interviews

Stuart Neal, CEO of Boku Inc, discusses the exceptional revenue growth driven by global local payment methods and digital wallets in an exclusive interview with DirectorsTalk. Discover more about the company’s financial highlights and future expectations.

Boku Inc (LON:BOKU) Chief Executive Officer Jon Prideaux caught up with DirectorsTalk for an exclusive interview to discuss financial highlights, local payment methods, 50 new launches with new merchants in 27 countries, reaching over 7.5 billion end user accounts, and what can we expect to see from the group over the next year.

Q1: Boku released its interim results this morning with revenues up 26%, and that’s from last years’ first half. Could you just talk us through the financial highlights please?

A1: well, it’s all kind of up and to the right and flashing green as they say. To be honest, we’re really pleased with the results we’ve got, revenues were up, as you say, 26% but if you look at that on a constant currency basis, that would translate about 32% up from the previous year.

That growth has come across all of our lines of business, both the direct carrier billing business but also from local payment methods.

Q2: You mentioned strong growth was driven by the local payment methods but could you just talk us through what local payments are and what they mean for the group?

A2: What’s not quite so obvious for us sitting in a world where most payments are undertaken using cards in sort of another is that across most of the rest of the world, and in fact to some extent here in the UK, other methods of payment are gaining traction.

So, a mobile wallet will be something like Alipay in China or PayPay in Japan, and there are literally dozens of these different payment methods all around the world, they’re all unstandardised but they’re very popular in the countries in which they operate. Collectively, the mobile wallets and account to account based payment systems of the world account for more payments than cards do and they’re growing faster.

What Boku has done is effectively taken the skills that we learned in carrier billing for dealing with individual payment issuers and bringing them together in a standardised way for global  merchants.

It’s working incredibly well, we managed to post growth in that segment of our business up 350% to $7.2 million, that’s now accounted for just under 20% of our overall revenue. If you think about it, that’s the thing that’s been driving the growth forward for the group in the last period, and particularly showing through in the revenue numbers in this first half. That’s also what’s underpinned the increase in our EBITDA to $12.2 million, once again up by 28% over the period.

Q3:You had almost 50 new launches with new merchants in 27 countries, can you tell us more about that?

A3: It’s dazzling, isn’t it? These launches are really combinations of wallets or account to account or direct carrier billing connections with particular merchants so a particular merchant might’ve been live, one wallet might’ve had two or 3 merchants and so on.

So, nearly 50, I think it’s actually 47, but the fact that it’s in 27 countries really gives you a sense of the breadth that we operate in. Now, most recently, we’ve got ourselves a payment licence in Malaysia, for example, adding to our portfolio of payment licences that we have all around the world. The strength of the group is we are genuinely a global company bringing to the tech giants of the world, these local payment methods wherever they might be.

Q4: The groups’ mobile first payments network expanded to reach over 7.5 billion end user accounts, 46 of those are non-direct carrier billing, what does that mean for the group?

A4: We’ve come from a world in which our history was very much about allowing people to buy things and charge it to their phone bill, but increasingly, as you know, we’ve been going after these local payment methods like wallets and account to account.

These 7.5 billion accounts, many people will be holding more than one; they have a phone bill, they might have one or two wallet accounts or what have you. The fact that the reach of the network is now nearly half on local payment methods, there’s still only 20% in terms of our total revenue, you can see where the revenues are going to come from in the future.

To some extent, that 46% is a leading indicator of where we would expect things to go, and over medium term, we do expect our growth to continue to come from wallets and then subsequently from account to account payments, and ultimately for these means of payments to eclipse what we were doing in direct carrier billing.

At our Capital Markets Day, we set out targets for us to double our revenues in the medium term, and also to achieve EBITDA margins of around 50%, and I’m happy to reiterate those targets to you here today.

Q5: Now, Jon, you’re set to retire as CEO on the 31^{st of} December 2023 but you’ll remain on the Board as a non-exec director, and Stuart Neal, former CFO, is due to take over as CEO  on the 1^{st of} January 2024. With that in mind, just looking forward, what can we expect to see from Boku over the next year, would you say?

A5: More of the same, I think.

The group has been on a journey which has involved adding these new payment methods and upselling our existing customers, and that process has started, and has started to show through in results but it’s far from complete.

Growth can continue clearly by selling to the remaining of our large customers who do not take wallets, and we’re very confident we’ll be able to make progress on that over the course of the next 3/4/5 months.

More than that, we expect each of our customers to then take more of those local payment methods, they still only use a relatively small portion of our catalogue.

Finally, growth is going to come from just penetrating more deeply within the different business divisions of our merchants, a good example of that would be with Meta. We originally worked with Meta in a very small part of their business, Facebook Games, and now we are being used by Meta to help purchase ads, the main business of Facebook, and ads in multiple countries with 20 different local payment methods.

So, it really goes to show the story of Boku is going to continue long after I’ve vacated the chair, and I have to say, I’m delighted that we are able to get Stuart to be the CEO to take the business forward.

Boku Inc Chief Executive Officer Jon Prideaux caught up with DirectorsTalk to discuss highlights from their 2022 FY results, what’s driving growth, new customer wins and what we can expect in the next year.

Q1: 2022 full year results are out this morning, could you just take us through the highlights?

A1: Financially, some of the headline numbers were affected by the strong dollar and so, at a headline level, revenue was up about 3% to $63.8 million.

If you take out the effect of the strong dollar, what you’ve got is a much more health picture with revenue up at 14% on a constant currency basis. Even looking behind that, you can see an acceleration through the course of the year so the first half was 9% but the second half growth in constant currency terms was 21% up year-on-year. So, really something which is quite encouraging.

EBITDA was $20.5 million so that’s an EBITDA margin of about 32%, and we ended the year with very very healthy cash balances in excess of $116 million.

So, all in all, a strong year and that strength was very much driven by the performance of our Local Payment Methods (LPM).

Q2: Your growth is primarily driven not by Direct Carrier Billing anymore but by mobile wallets and account-to-account/real time. Can you tell more about this and what direction the Company is now going to go into?

A2: We’ve been doing this for quite some time but I think this is the year, or certainly the second half of the year when some of that started to break through.

So, the thing that’s driving the growth is very much the use of mobile wallets, as you say, account-to-account or real time payments methods, predominantly in Asia, and these payment methods are the predominant way that people in many countries pay. It’s quite a surprise when I say it but two thirds of all payments of the internet are not made with Visa or MasterCard, they’re made with these succession of different payment methods.

So, global companies like Spotify, Sony, Meta, Amazon, Netflix and others have come to Boku in order to be able to reach our network of these payment method. We built a pretty wide network around Asia, stretching into the Middle East now and Africa which allows these companies to access consumers in the way that they want to pay.

That really started to ignite in the second half of the year and that’s really what’s been driving quite a lot of our growth.

Q3: In the RNS, you mention that the Company received new customer wins and new launches, such as the new multi-year Amazon LPM contract. Can you tell us more about this and what this means for the group?

A3: This is validation of the strategy I was just talking about.

There’s been two significant wins, one is somebody I must euphemistically refer to as a major games console provider but we were working with them in China so China is the world’s largest games market and we were able to facilitate the connection of Alipay and WeChat Pay, the world’s two largest wallets. So, that has really started to impact on our growth.

The Amazon deal was also another massive win. We were selected by Amazon to be their Local Payment Method provider, and it was a strategic deal that involved not only our operating LPM’s for Amazon but also Amazon having the ability to earn shares in Boku, depending on the amount of revenue that they undertake. So, there’s something like 11 million shares if they are able to achieve a transformational level of revenue over the next 7 years.

So, we really do see that as a complete validation of our strategy, we’ve been picked out as being the ‘quality player’ by some of the major digital companies in the world, and we really look forward to an encouraging period through 2023/2024 and beyond.

Q4: As you mentioned, you started this year strongly. Just looking forward, what can we expect to see from the Company in the next year?

A4: More of the same. We’ve got a situation here where, like you said, our Direct Carrier Billing business is solid, it’s the mid to high single-digit growth engine but it’s coupled to this rocket ship of triple-digit growth coming from the Local Payment Methods; wallets and account-account.

We talked about the Amazon deal, the true this is the Amazon deal hasn’t had any impact on the figures so far and we’re only just starting to launch in a small way in this quarter so  we’ve had no impact.

We would expect to obviously have Amazon launching, that’ll start to feed through in the latter part of this year, and more strongly in 2024. We’ve got the launches we’ve done in China, the work we’re doing with companies like Meta and Spotify and Netflix, all of which we think will help us continue to power our growth, particularly on wallets and LPM’s. These are going after much larger TAM’s than Direct Carrier Billing is able to address.

So, we feel confident in the midterm forecasts that we gave at our Capital Markets Day, of being able to double revenue and indeed to increase our EBITDA margin to above 50% over the medium term.

Honestly, I think we’re at the start of a new phase of faster growth than we’ve seen in the past couple of years.

Boku Inc (LON:BOKU) Chief Executive Officer Jon Prideaux caught up with DirectorsTalk to discuss highlights from their interim results, e-wallets & real time payments, the contract with Amazon Payments, Chinese opportunity and what we can expect to see in the rest of the year.

Q1: First off, congratulations on today’s interim results. Could you just start by talking us through highlights from the period?

A1: I think the highlights for us have really been strong underlying performance in the business, we saw our total number of monthly active users increase by 22% to 46.3 million users.

Behind the figures, the thing that we’re most pleased about really are some of the validation that we’re getting for our new local payment methods strategy. It didn’t quite happen within the period, but we were able to announce last week that we had a new multi-year contract with Amazon Payments, which is a real validation of the strategy.

Just today, we’re also able to talk about the fact that we’ve had our first launch in China, and all of this underpins, frankly, the stunning growth that we’ve been having in volumes and monthly active users on these new local payment method types; e-wallets and also real time payments where volumes are up about 11 times year on year if you take the first half.

Q2: Efforts into e-wallets and real time payments, they’re certainly being validated. Could you just expand on that for us a little and just explain what it means for the group?

A2: For the group, what it means is moving out of the relatively limited marketplace of direct carrier billing, which is essentially appropriate for certain types of product, principally digital entertainment.

So, the significance of something like realtime payments is you can start undertaking payments for advertising and that’s something that we’ve done with Meta, formerly known as Facebook, where small businesses can buy adverts on the meta platform now through Boku and pay for it with real time payments. This is a market that we really weren’t able to access at all when we were concentrating solely on direct carry billing.

So, these new areas take us into a bigger marketplace, and we’re starting to see that follow through with the very impressive growth rates we’re seeing across those new payment methods right now.

Q3: You mentioned earlier Amazon, so you’ve signed this agreement with Amazon, but could you just tell us a little bit more about the deal and the company’s role in it?

A3: So, the deal, as per the announcement, is initially with Amazon Prime video and it involves a launch of wallets in a number of countries in Africa and particularly within Asia.

Now, the significance of the deal really is we went through a procurement process that lasted well over a year, was extremely competitive, and Amazon selected us in preference to any of our competitors on the merits of our local payment method catalogue and capabilities alone. They didn’t use us for direct carrier billing so this wasn’t a case of an upsell from one type of payment to another, it was Amazon, the world’s largest eCommerce company, taking a look at us as a pure play for local payment methods and deciding that the company that they wanted to work with was us. More than that, they liked it so much that they put in place a structure through warrants that mean that Amazon have the capability of getting warrants up to about 3.75$ of Boku provided that they spend what would really be transformative levels of revenue with us over the next seven years.

So, it’s good for us, it’s real validation of the strategy and we can’t wait to get started.

Q4: The company recently launched into China, the world’s largest e-wallet, Alipay. Can you talk us through this development and how you see the Chinese opportunity?

A4: Well, I talked earlier about how getting into local payment methods brings us into markets with more available market and this is a great example of that. It’s not just moving into new merchant verticals like the advertising I was talking about with Meta and Facebook, it’s also about moving into entirely new territories.

We couldn’t, for regulatory reasons, get into China with direct carrier billing, but here we are taking an existing version – unfortunately they don’t allow us to name them – into China with the world’s largest wallet, Alipay.

I can tell you that although it’s only been live for about two or three weeks, the initial expectations are way ahead of our expectations, and it really is a validation, here we are first time launch into China, with the world’s largest wallet and it’s going incredibly well.

Q5: So, just looking forward then, what else can we expect to see from Boku for the rest of the year?

A5: Continued growth in local payment methods, more launches, hopefully more launches in some of the territories that we’ve been talking about earlier on.

One of the things that we’ve been focusing on is not just doing launches within Asia, but we’d hope to have our first launches within the Middle East, further developments within Africa and also, taking our local payment method approach into Latin America also.

So all of these things are now starting to build up a real head of steam so that most of our growth is coming from the new local payment methods. That’s not to say that direct carrier but isn’t performing. It’s now coming off a period where there was some very tough comparables, and although we have been battling at the nominal level against a sharply appreciating US dollar against all of our major trading currencies such as Japanese Yen, Korean one, Euro, and to a lesser extent GDP, you’ll find that the growth is really start to come through, driven by the efforts in these new local payment methods.

So, yes, we are looking forward to the future with really great optimism.