Bango: Interim Results
Bango (AIM: BGO), the mobile commerce company, today announces its unaudited interim results for the six months ended 30 June 2018.
Five Minute Pitch TV filmed Rachel Elias Jones, who provided an update on the last six months
BANGO INTERIM RESULTS VIDEO
BANGO RESULTS VIDEO
H1 2018 Financial highlights
- End User Spend (EUS) increased 138% YoY to £220m (1h2017: £92m)
- Total revenues increased 54% YoY to £2.63m (1h2017: £1.72m)
- Payments business EBITDA positive
- Group Adjusted LBITDA* -£0.90m including Audiens (1h2017: -£1.01m ex Audiens)
- Operating costs £3.30m in-line with forecast (1h2017: £2.72m) including increased product development and targeted investment in data business
- Cash £5.88m at 30 June 2018 (30 June 2017: £5.56m; 31 Dec 2017: £4.85m) Expected to fund the Group through to profitability and cash generation. Cash sufficient to support both planned investment to grow sales and develop new products
* Adjusted LBITDA is Operating Loss before depreciation, amortization and share based payments.
H1 2018 Operational highlights
- Expanded the use of billing integration technology, enabling customers to sign-up for Amazon Prime Video in the USA, UK and India
- Pandora, a leading music streaming service, chose the Bango Platform for mobile operator launch in USA
- Additional Google Play routes in Africa and South America. The deal pipeline with mobile operators to upgrade to the Bango platform now covers EUS well in excess of $4Bn/yr and proposals are progressing well
- Expanded team in Japan and Korea. Support for Google Play developers using the Bango Platform to increase marketing activity with mobile operators
- Acquired Audiens SRL in January 2018, backed by £5.02m placing with existing Bango shareholders. Acquisition adds IP, expertise, commercial agreements to accelerate Bango data monetization capability by 12 months, and adds new revenue streams
Delivering the Bango Platform strategy
Bango has created a unique and powerful platform that enables merchants and payment providers to collaborate and thrive. Leading merchants including Amazon, Microsoft, Google and Samsung use the Bango Platform to collect payments from tens of millions of customers and gain increased marketing effectiveness and reach from data that only Bango can provide.
The Payments business is operating profitably, has high operating margins and a stable cost base as transaction volumes grow rapidly, driving success for Bango and its customers. New merchants, new carrier billing and wallet routes, enhanced through Bango Boost technology, continue to drive EUS growth at a rapid pace.
By using the Bango Platform merchants benefit from the extensive consumer data provided by mobile operators together with payment data from hundreds of millions of transactions. Mobile operators can now partner with the leading developers in ways that were impossible before Bango, to open up new revenue sources and grow their carrier billing activities faster. The addition of new Bango Audiens technology will accelerate the growth of this new revenue stream.
The investment in enabling data monetization for Bango customers opens up new revenue streams that are expected to be substantial in the coming years and drive additional profitable EUS growth through the Bango Platform.
Ray Anderson, Chief Executive Officer at Bango, commented:
“The Bango Payments business reached positive EBITDA at the end of 2017, and new customers and routes launched in the first half of 2018 are driving profitability further.
I was delighted with the support Bango received in acquiring Audiens in January 2018. The technical and commercial integration is proceeding rapidly, with clear synergies opening up a new data-derived revenue stream at a faster pace than originally planned.
Mobile operators around the world are seeing the substantial additional profit they can make by working with Bango. An increasing number are expected to upgrade to Bango in the coming months.”
Worldwide there are 4 billion smartphone users. They can play music, movies, games, order and pay for transportation and access a vast array of other services.
Merchants and services providers, and the stores through which they sell their products, are focused on acquiring new customers and collecting payments from them for valuable services.
The Bango platform was created to enable merchants and payment providers to work together to collect payments and to benefit from the valuable data resulting from these transactions and available from the payment providers.
Major global businesses are now relying on Bango to achieve their goals. They add more paying customers, generate better results from their marketing campaigns, and partner with each other through the unique market nexus that Bango provides.
The Bango Platform – powering synergistic payment and data business – continues to gain momentum. It uniquely enables merchants and payment providers to cluster, collaborate and thrive.
Payments business and EUS growth
The payments business is growing rapidly and expected to continue to grow rapidly. More merchants are using the platform to collect payments and more payment providers are integrating with the Bango platform to provide payment services.
End User Spend (EUS) continued its four-year growth trend of at least doubling every twelve months and this growth momentum is expected to continue. In 1h2018 a range of new content and services were launched using the Bango Platform with many new payment routes added to reach hundreds of millions of new users for Bango merchants.
Bango expanded the use of its billing integration technology, enabling customers to sign-up for Amazon Prime Video in the USA, UK and India through leading mobile operators. Using Bango’s billing integration technology, qualifying customers have the opportunity to subscribe to Prime Video as part of the customer’s mobile plan.
Launches in the USA and the UK follows Bango’s initial launch with Amazon in India for Bharti Airtel, India’s largest mobile network operator. Bango technology ensures that entitled mobile customers receive uninterrupted access to Amazon Prime Video from the moment they become active, for as long as they continue to subscribe and pay their mobile bills.
Pandora, a top three US music streaming service chose the Bango Platform for a major mobile operator launch in the United States.
Significant new launches in Latin America and Africa with Google Play will also drive EUS and revenue growth going forward.
Bango Boost continues to provide valuable insights to mobile operators and App Stores that use the Bango Platform.
With a stable cost base, meaning no additional cost for additional payment processing, the increasing EUS through the Bango Platform and increasing revenues are driving the move towards profitability for Bango.
Current systems have been tested to transaction volumes equivalent to EUS in excess of £5Bn/year. With EUS levels in the sales pipeline for upgrades from direct connections equivalent to more than $4Bn/year, software development is underway to ensure substantial additional capacity is available in 2019 and 2020 without additional operating costs.
The data gathered from processing payments and attempted payments across hundreds of millions of transactions combined with the unique consumer data available to mobile operators that provide direct carrier billing services have huge potential value, provided they can be used in a safe, secure and acceptable way by market participants.
The acquisition of Audiens SRL in January 2018 brought forward the launch of this business by around 12 months, and it is now broken out as a separate line of business within Bango.
The data gathered by the Bango Platform can provide improved user experiences, more effective marketing and more profitable business for merchants and mobile operators.
A simple example is where Bango provides merchants with the ability to focus marketing on users that have a proven ability to pay. Merchants avoid marketing to users unable to pay, saving expenditure and avoiding user disappointment. More sophisticated marketing strategies might benefit from information about user demographics, location, device history or historic spending behavior,
Bango ensures that data can only be used in ways that protect personal data from misuse. When data is used for marketing, rigorous controls are essential to ensure only general “audiences” are presented – not data on individual users. The capability to avoid merchant visibility of mobile operator identity information and to avoid merchant identity passing to payment providers has been a core part of the Bango Platform since its inception.
The investment in the integration of Audiens technology into the Bango Platform has enabled rapid acceleration in the monetization of data. Data can now be segmented and organized to create valuable audience segments that can be used for marketing. Audiens technology is already integrated with the leading trading platforms that present these audiences to merchants in the way they normally buy data.
During 1h2018 Bango ran initial marketing trials with leading developers using pre-release versions of the new data monetization technology. Results were encouraging. Three case studies, targeting audiences in the USA, Indonesia and Italy are now available to mobile operators to show how they can drive new revenue streams from data monetization using the Bango Platform. In one case, investing marketing spend with a mobile operator using Bango data for a leading Karaoke app increased premium customer acquisition rates by a factor of 9 compared with conventional methods.
Mobile operators can generate profits from acting as payment processors by offering direct carrier billing. App Stores and large merchants see the value from expanding their reach to new consumers, there is always pressure on payment providers to reduce cost of payment collection. The additional revenues available from providing data to enable more efficient marketing by merchants through using the Bango Platform are significant. Bango has developed a business tool to enable mobile operators to model additional profit that can be gained by upgrading to Bango and monetizing their valuable data.
Now that Bango and mobile operators can share both new data revenues and traditional payment revenues from delivering value to merchants, there is increasing competitive advantage and flexibility in negotiating commercial contracts. Payment processing incentives can be offered in return for data monetization revenues.
To deliver on the opportunity presented by this technology innovation, Bango has expanded its sales and marketing team based in Japan and Korea to support Mobile Network Operator (MNO) upgrades and merchants in Asia where carrier billing is widespread and essential.
To capitalize on the huge opportunity from bringing payment and data together, a new member of the leadership team, Kaushik Sthankiya, will be joining Bango as SVP Business Development in October. He brings extensive experience in leading global sales and business development teams at Docomo Digital, Mastercard and Visa,
To date, more than 200 Google Play developers have already registered with Bango to invest in audience targeting using data from mobile operators. Many of these are eager to invest in expanding their presence in markets where Bango has built a strong mobile operator footprint.
Bango acquired Audiens to gain access to its technology and programmatic advertising integrations for the Bango Platform. Alongside the Bango Platform, the Audiens Customer Data Platform (CDP) business continues to grow and has huge potential beyond Bango merchants.
As part of Bango, Audiens now benefits from expanded technology infrastructure and capability and access to new global opportunities. The sales team has been expanded to operate outside Italy, and to exploit new opportunities opened though Bango relationships. Recent customer wins for the Audiens CDP include LeoVegas, Morelatto and Unieuro and these are expected to be followed by many more as business expands outside Italy.
Growth from industry leaders: The last six months have been successful for Bango as it continues to win important contracts and expand its business through its unique offering. As well as the increasing momentum with Android users, representing around 85% of the market, Bango is seeing increasing adoption on iOS devices popular among Amazon and Pandora users.
Data monetization opportunity: Data monetization is becoming increasingly important to Bango and is opening new avenues for revenue growth and customer acquisition. The high additional profits available to mobile operators by using the Bango Platform are a persuasive reason for them to upgrade to the Bango Platform for Direct Carrier Billing (DCB).
Capacity for Innovation: The cash raised to support the Audiens acquisition has ensured that Bango retains strong cash balances, enabling growth to profitability and continued investment in capitalizing on the huge opportunity from bringing payment and marketing together.
Chief Executive Officer
Bango business model
To provide clarity to investors, following the acquisition of Audiens SRL in January 2018, Bango now provides financial reporting of two synergistic business units. The Payments business processes payment transactions through the Bango platform for the world’s leading digital and physical merchants. The Bango data business facilitates the monetization of valuable data collected by payment providers and mobile operators to enable more efficient marketing. The data business includes data monetization within the Bango business – using data from mobile operators and other payment providers – and also the Audiens CDP business which serves a wide range of marketeers and advertisers.
End User Spend (EUS)
EUS is the total sales processed through the Bango Platform excluding taxes. EUS shows the growth of commerce through the Bango Platform. It is the most significant Key Performance Indicator that management uses to measure the development of the business and the continued success of Bango customers and partners.
EUS for 1h2018 was £220m, up 138% from 1h2017 (£92.31m) due to growth from existing activations and additional EUS from new activations in 1h2018. In 2018 Bango has seen growth across all major partners connected to Bango, including Google Play, Amazon, Microsoft and other streaming video and audio merchants. Bango continues to drive increasing transaction volumes at low fixed cost to drive revenue and profit to Bango in 2018 and beyond.
Bango earns payment revenue from every transaction processed through the Bango Platform. Revenue is either a fee based on the value of the transaction or a fixed fee per transaction. Each additional sale by a merchant using the Bango platform adds to EUS and increased revenue.
Bango earns data revenue either as a percentage of the fee that a data owner earns by selling their data through Bango to merchants or other advertisers or as a monthly fee for using the Bango Audiens CDP to create data segments they directly exploit.
Payment revenue increased to £2.22m from £1.72m in 1h2017, an increase of 29%.
Bango is focused on partnering with its MNO customers to drive substantial revenue from data monetization and encourage huge growth in total EUS. At the beginning of 2018 Bango renegotiated its contract with a large MNO to reduce the payment processing fee but increase the opportunity for data monetization revenues. The short-term impact of this change was a £0.5m payment revenue reduction in 1h2018 and an anticipated revenue reduction of approximately £0.2m in 2h2018. Payment revenues are expected to be higher in 2019, and in addition there will be a significant contribution from the data revenues that are enabled by this contract change.
Where payments are collected for a service lasting 12 months or more, for example a streaming service, revenues and EUS are recognized evenly over the life of the subscription in line with accounting standard IFRS 15.
Most of the Bango data revenue in 1h2018 was from the Audiens CDP on a monthly fee basis with no cost of sales. Revenue was also generated by third parties monetizing their data by using the Bango Platform or the Audiens CDP to segment their data and sell it through the trading desk integrations. The revenue recognized is the value of the data as sold through the trade desks and the costs of sales relates to the fees that is paid to the data owners and trading desks.
The total group cost base of £3.30m for the first half of 2018 (1h2017: £2.72m) was in-line with forecasts.
The cost of operating the Bango Payment business was £2.15m including all business costs such as administrative expenses, sales and development. Group costs are those not necessary for the day to day processing of transactions and relate solely to costs related to Bango remaining a UK PLC, including advisors, bankers and audit fees. Costs related to Bango data business include the existing Audiens cost base and some centrally recharged costs necessary to support the business unit including accounting, IT and legal fees. Bango expects the costs for 2h2018 to be in line with 1h2018. Operational cost efficiencies were redeployed into increased sales and marketing activity.
The core Bango Payment business was EBITDA positive for 1h2018. The Bango Platform can process EUS at many times current levels with no additional operational cost. The capacity of the platform is regularly tested to rates in excess of £5bn of EUS a year, and to hundreds of transactions per second to ensure there is always substantial headroom in the platform to handle sudden surges in volume. Bango partners require substantial headroom to ensure their growth ambitions can be supported by Bango. Bango continues to invest in new developments by the R&D team to ensure that existing direct Google Play routes, can be upgraded faster to the Bango platform to bring hundreds of millions of EUS to the Payment platform.
The Bango data business is not EBITDA positive, but it is expected to become EBITDA positive in the next 12 months based on the roadmap of future sales and expected synergies between the Bango and Audiens businesses which will generate additional revenues. Bango has also invested in legal and security reviews to support the growth of this business in relation to national regulations such as GDPR and personal information security. Bango R&D has securely integrated the Audiens technology into the Bango platform.
The share-based payment charge for 1h2018 was £0.45m (1h2018: £0.33m) calculated using the Black-Scholes model. It relates to the Bango share option program that enables all Bango employees to share in the growth in value of Bango. It is a vital recruitment and retention tool in a highly competitive employment market.
Depreciation was consistent with the prior year at £0.13m compared to £0.09m in 1h2017. Amortization relating to capitalized development costs and acquired intangibles was £0.71m compared to £0.60m in 1h2017.
Loss and Loss per share
The loss after tax was -£1.92m (1h2017: -£1.75m) as Bango invested in acquiring and integrating the Audiens business in the first half of 2018 to drive future growth from new Bango revenue streams.
Loss per share was 2.78p (1h2017: 2.67p).
Cash balance on 30 June 2018 was £5.88m (£5.56m on 30 June 2017). Cash was raised in January 2018 to fund the acquisition of Audiens SRL, and subsequently in the integration and development of Audiens and the Bango data business. Based on the growth of the business and controlled cash, the cash burn in Bango in the last year has been decreasing, and with further growth in revenue expected in 2h0218 and beyond Bango will have sufficient cash resources to support both planned investment to grow sales and develop new products to ensure Bango has a strong pipeline of upgrades and can process hundreds of millions more EUS in the near future.
Chief Financial Officer