Boku: A new phase of faster growth (LON:BOKU)

Boku Inc (LON:BOKU) 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.

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