Good morning, ladies and gentlemen. Welcome to the Bango PLC interim results investor presentation. Questions are encouraged. They can be submitted at any time via the Q&A tab that is just situated on the right-hand corner of your screen. Please just simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company can review all questions submitted today and will publish our responses where it is appropriate to do so. Before we begin, we would just like to submit the following poll, and if you could give that your kind attention, I am sure the company would be most grateful. I would now like to hand you over to CEO, Paul Larbey. Paul, good morning, sir.
Good morning, and thank you everybody for joining. We appreciate your time this morning as we talk through the results of the first half of 2026, and give you a bit more context and color around the business. I will start with a quick overview and reminder of the business and the highlights for the half, before turning it over to Matt to review the financial sections in a lot more detail. Then I want to end by giving some real-world examples of how the DVM is being used in all sorts of different applications, before talking a little bit about the outlook, and we will then turn it over for Q&A, and Sukey will guide us through the Q&A. Thanks to everybody who submitted questions in advance. As we just heard, you can submit them using the panel at the side of the screen.
Throughout the presentation today, we will talk about the two business segments that we operate within Bango. That is payments and subscriptions. As a reminder, payments basically is a way of allowing users to purchase both digital and physical goods and to charge it to their mobile phone. They can purchase those goods from people like Amazon or Google or a whole host of other merchants. They pay for it using their mobile phone in one of two ways. It can be charged directly to their bill, and we call that direct carrier billing or DCB as we go through the deck, or also potentially to the balance held in a mobile wallet.
It is a simple, robust, trusted payment mechanism that is very popular in developing markets, especially where there is a large unbanked population, but also in developed markets such as Japan, where there is really a customer preference to pay for things with their telco, whether that be things they are buying online or purchasing a sandwich or a coffee from the 7-Eleven store on their way to work in the morning. We are one of only two global DCB players, and the largest integrator for the Google Play Store. We first launched with Google back in 2012, so a long history with Google. We are the leading provider in Japan. In Japan, we started with Amazon back in 2017, adding carrier billing for the amazon.co.jp store, initially with the largest operators, NTT and KDDI.
In 2020, we added SoftBank to that, so covering the three largest operators. Then when we acquired DOCOMO Digital in 2022, we signed a long-term agreement with NTT DOCOMO to provide their remaining DCB services from app stores through to Shopify shops through to airlines, in addition to the Amazon business that we were already supporting for NTT DOCOMO. If we look at subscriptions, the role of the telco shifts from being purely a payment instrument, so a way of accessing the funds, to the actual reseller of the service in subscriptions. It is the telco's way of attracting, retaining new users by bundling a third-party service with their first-party telco services.
Our product for that is the Digital Vending Machine, which supports over 130 different subscription services, allowing those providers to distribute their product, not only to telcos, but to new verticals such as banks, retailers, and connected TV providers. Subscriptions is a great business because everyone in the ecosystem benefits. The telcos, as we said, use that to attract, retain customers, and generate more revenue. For the content partners, it is their way of reaching new customers and new consumers and having somebody else market their content. As consumers, we get a better deal and more control over our subscriptions. If we look at the DVM in more detail and the platform that we operate within Bango. Across both payments and subscriptions, this platform approach allows everybody in the ecosystem to connect once and access many, and access a broad ecosystem of partners.
If you are a telco such as Verizon, one connection gets you access to over 130 different subscription services. If you are a subscription service like Disney, one connection allows you to resell your service through a growing network of over 150 telcos, banks, and retailers. What makes the DVM really unique is that end-to-end lifecycle management. This is not just about the connection, it is about that end-to-end lifecycle of a subscription. From test environments and tools that allow people to connect into the DVM and validate their connection, through to tools to allow you to migrate existing subscriptions over onto the DVM, to partner discovery, which allows content partners and resellers to find each other, to discover each other. If you are one of our pre-stocked partners where we have existing commercial terms, that is the fastest way to find and resell and launch a new bundle service.
The offer capability, and we will see some great examples of that at the back end of the presentation, allow these bundles to be defined and managed and the complex rules to be applied. Is there a free period? How long does the free period last? Can you upgrade the subscription to a premium tier? What happens if you downgrade? All of those rules are addressed within the offer management capability that we provide within the Digital Vending Machine. That is functionality that historically may have been done in the telco's OSS or BSS system. The CX or user interface provides a white label capability for any brand to take what we have and embed it within their existing app or website, giving a really fast way to launch new services and launch the DVM to their customers.
Once the offer's live and the consumer's activated, the DVM really shifts into performance and taking actions to drive success. This is where AI really helps us differentiate, both in looking at the data within the platform to understand how we can drive improved subscription success, but also embedding that into agentic workflows, which automatically will start to take action to drive increased subscription. Remember, the revenue model that we have for this business means that as our customers grow, so does the Bango revenue. That really is the benefit of the platform approach, and that's where the R&D that we're investing in the platform, and have invested over a number of years, is really helping to drive the growth. If we take that end-to-end solution, which really is unique in the market, it itself creates a very significant barrier to entry for competition.
That's actually compounded by that when you consider that we're connected into identity systems and billing systems of organizations such as telcos and retailers. Very sensitive systems that they trust us to connect into. It's that trust that we've built with the world's largest media companies and telcos and banks that's really, really important and sort of adds to the differentiation, because they're relying on Bango to support their growth. Actually that trust they place in us and their reliance on us to support their growth only increases as adoption of the platform grows. This growth itself gives us unique insights into how all these subscriptions are performing and how we can drive more success, which further goes to accelerate the growth of the platform.
This defensible position we have, the competitive differentiation, only grows as more people join the platform and as people use the platform more. Its foundation is that platform and the trust that some of the world's largest companies place within Bango. We look at the first half results, you can see that existing customers saw some great growth in the first half, adding more and more subscriptions, which generates more revenue because of that revenue model that I discussed earlier. An NRR of 119% is a clear indication of that, and is one of the big drivers behind the overall ARR growth. Sales momentum continued into fiscal 2026. We had six new DVM wins at the end of the half. That number is now eight. I think importantly, there's a lot of white space ahead of us. There's a lot of untapped opportunity.
We are tracking over 100 telcos, each with more than 4 million customers, let alone the opportunity in new verticals which are only just starting, such as banking, retail, and connected TVs. The improving revenue quality and payments, coupled with the growth in the DVM, is very evident in the increasing gross margin, which increased to 87% in the half. In the half, I think one thing that's really clear is you see the benefit from the operational gearing in the platform and the cost efficiencies that we took over the past year or so. With a significant reduction in both OpEx and CapEx, the growth in revenue starts to increasingly drop to the bottom line. You saw that particularly in the subscriptions cash EBITDA number. We saw a 224% increase, and remains on track to be positive next year.
Payments maintained its strong cash EBITDA position, actually up slightly on last year, despite the top-line decline as we improve that quality of revenue. Let me now pass to Matt to walk through some of those in more detail.
Thanks, Paul. Good morning, everybody, and welcome to our financial results for first half 2026. Starting with slide eight, I think a powerful slide to begin with, which shows the significant progress we continue to make across our KPIs. Before we unpack the numbers, the core message I want you to take away is simple. The quality of our growth is improving, and this is now translating into cash earnings and profit. Four numbers I draw attention to in particular. Firstly, our annual recurring revenue. Momentum continued in H1, growing 31% year-on-year and surpassing GBP 20 million. Secondly, net revenue retention also remains strong at 119%. This demonstrates the continued expansion we are seeing within the existing customer base as their platform adoption increases. Third, adjusted EBITDA. That higher quality revenue growth is increasingly translating into operating leverage.
Adjusted EBITDA increased 34% year-on-year to GBP 9 million, and our EBITDA margin was over 800 basis points higher, moving from 27% to 35%. Perhaps the most important progression, and fourth on the list, cash EBITDA. As Paul mentioned, last year we achieved GBP 2.3 million in cash EBITDA over the 12 months. Roll forward to fiscal year 2026. In the first six months of this year, we have already achieved GBP 3.7 million. Put simply, we have achieved 60% growth in cash earnings in half the period of time. This really demonstrates the attractiveness of the platform economics, and I will unpack each of those drivers over the next few slides. If we break that performance down by segment, the evolution of the business is particularly clear. Payments headline revenue reduced 5%, but this was expected and reflects the continued restructuring of low-margin routes.
The underlying growth in the core of the portfolio was up 3% year-on-year, and you can see that clearly in the profitability. Despite that headline revenue reduction, both adjusted EBITDA and cash EBITDA increased year-on-year. Subscriptions is then where we are seeing the operating leverage really emerge. Revenue increased 13%, but adjusted EBITDA more than tripled at 224%. Cash EBITDA saw a GBP 4.3 million improvement year-on-year, moving from negative territory 12 months ago to GBP 3.7 million, and that is strategically important. The earnings mix of Bango is changing materially. Payments remains a highly cash generative engine, but subscriptions is rapidly scaling towards its own positive standalone cash EBITDA business. And one that is supported by high net revenue retention, strong ARR growth, and to date, zero customer churn.
Moving to the next slide and looking specifically at ARR, we grew from GBP 15.6 million to GBP 20.4 million, an increase of 31% year-on-year. What is particularly important is where that growth came from, with over 60% coming from existing customers. We are seeing customers add subscriptions, increase usage, and move through DVM license tiers as their propositions scale. This highlights the quality of the model. We do not need to replace ARR base every year to grow. The installed customer base itself provides a meaningful source of expansion, and that is reflected in the 119% net revenue retention. Turning to payments on the next slide. As I mentioned, whilst headline revenue reduced, that reduction is driven by actions we have taken to remove high cost of sales routes.
Underneath, our core payments portfolio, which to remind everybody is the strategically more valuable, more profitable, and more reliable earnings stream, grew 3% year-on-year in line with expectations. You can see the resulting mix shift on the chart on the left. Core routes now represent around 90% of payments revenue, compared with 83% last year. We are deliberately exchanging lower quality revenue for a smaller but more profitable cash generative payments business, and that is reflected in the cash EBITDA increasing year-on-year despite that headline revenue reduction, and the increase in adjusted EBITDA margin to 43%, well ahead of our 40% target. The restructuring of those remaining high cost of sales routes is progressing ahead of plan, and we expect to be completed by the end of the year.
As you may have picked up in the RNS, depending on the final outcome of those restructuring actions, there may be a low single digit variation to the payments revenue, but that will have negligible impact on adjusted EBITDA. On slide 12, within subscriptions, revenue grew 13%, but that headline includes lower one-off DVM revenue, as you can see in the chart, reflecting the timing and mix of new business. Underneath that, the subscription-based recurring revenue, so that is revenue that is non one-off and is the majority of the mix, grew significantly faster at 39% year-on-year. That shift is important because it improves both the quality and the visibility of the subscriptions revenue base, and that is now producing significant operating leverage. Slide 13, looking at costs. The second major driver to the improvement in profitability is the work we have done on the cost base.
This cost reduction is structural. It is not simply a temporary squeeze on spending. Core administrative expenses in the first half reduced to GBP 3.3 million, a reduction of 15%. If you go back two years, we have taken GBP 5.5 million or 23% out of the first half cost base. That is the result of deliberate action to simplify the organization and establish a cost base appropriate for the business today. Importantly, we are doing that while continuing to invest behind the DVM opportunity. If you look at the chart on the right, we have then applied the same discipline to capital investment. Capitalized development costs reduced to GBP 5.3 million year-on-year, 31% below the level two years ago. To be clear, that is not about reducing ambition for the DVM, and we continue to invest in product development.
It's about becoming much more disciplined around where development resource is deployed, reducing friction and improving time to market. That matters financially because the combination of lower cost and lower capital intensity is what ultimately drives the significant improvement you're seeing in cash EBITDA. On slide 14, the improved economics are beginning to translate into the balance sheet. We ended the half at GBP 8.7 million net debt, down GBP 0.5 million from December and in line with our expectations. This bridge is important in understanding how the significant improvement in cash EBITDA is translating into deleveraging. As we mentioned, GBP 3.7 million of cash EBITDA in the first half. This was partially offset by GBP 1.4 million of exceptional cash costs. These relate to the fiscal year 2025 efficiency initiatives, together with working capital, lease and interest costs, and tax.
The key point is that a meaningful part of these cash outflows relate to actions taken in 2025 rather than the ongoing operating cost base. Those exceptional cash costs will fall away, while the impact of working capital normalization is also expected to moderate. As a result, we expect an increasing proportion of that cash EBITDA to translate into net debt reduction, supporting continued deleveraging as we go through fiscal year 2027. Slide 15. I'll briefly take you through the remainder of the income statement where the emphasis is on a much cleaner reporting period. We've already covered the key operating movements, gross margin increasing 87%, core administrative expenses reducing 17%, and adjusted EBITDA increasing 34%. Below EBITDA, D&A increased as historic investment continues to move through the amortization cycle.
D&A is set to peak in fiscal year 2027, and then it will fall in line with capitalized development costs. We had zero exceptional costs in the period, compared with GBP 1.8 million last year. Overall, operating profit turned positive, compared with a loss of GBP 2.9 million last year. Adjusted profit after tax also turned positive. Those are two important milestones in particular, and profit at the bottom line is a signal of the growing maturity of the business. Slide 16, last from me, stepping back, I think the first half demonstrates three important changes in the financial profile of Bango. First, growth quality is strengthening and an increasing proportion of our revenue is recurring. Second, operating leverage is coming through. Gross margin improved by more than 300 basis points, costs reduce, and cash EBITDA margin reached 14%, compared with a negative position last year.
Third, we're building a stronger financial model. Payments remains highly cash generative, subscriptions is rapidly moving towards positive standalone cash EBITDA, and at the same time, we're continuing to de-lever. Looking beyond H1, I think our financial priorities are therefore very clear. Continue growing ARR, convert that growth into cash EBITDA, complete the payments optimization, and continue strengthening the balance sheet. The important point is those aren't independent objectives. Higher recurring revenue drives operating leverage, operating leverage drives cash EBITDA, and stronger cash EBITDA gives us greater capacity to deleverage while investing in growth. I'll hand back over to Paul to take us through the progress in the DVM.
Thanks, Matt. As a reminder for everyone, there are four pillars to our strategy. One very much focused on the payments business, and that's the extract pillar, and that's about making sure we continue to maintain that high level of profitability and cash generation from that business. That doesn't mean it doesn't grow. You'll have seen we signed two new deals already this year on the payment side with Telin in Hong Kong and LMT in Latvia, new customers bringing their Google Play Store business over onto Bango. So it continues to grow, but we're selective about that business, we're selective about the routes that we will do, where we can see the scale and profitable and where there's high quality revenue. That means from blue-chip merchants that's predictable, that's sustainable, that we can see good growth into.
The remaining three are really focused on the DVM, and expand is really all about telcos. I'm going to go into some real examples of how telcos are using the DVM on the next few slides. Explore takes that into other verticals. I think we've talked previously about the bank that we signed at the end of last year that's currently in friendly user trial, and we'll launch that service more broadly in the coming months. Then enhance is how we take that data and the knowledge we have in the platform to drive even more success, and I touched a little bit on that at the start of the presentation. Let's focus on expand and where we see some real examples, and I'll give you some examples from all over the world of how telcos in particular are using the Digital Vending Machine.
Let's move to Belgium. Proximus is the largest operator in Belgium and has over 3 million customers. When people ask about the opportunity ahead in DVM, I think there are two elements. You have to look at the number of customers within the telco, but also the number of subscriptions that those users could potentially take. So in Proximus, 3 million customers, a percentage of those will take a bundle, and as more services become available within the Digital Vending Machine, then the average number of subscriptions per customer increases. All of those, because of the revenue model we have, drive increased revenue for Bango with very minimal incremental cost, and that's why you see that dropping down to the bottom line of the income statement. In Proximus, the DVM is being used to replace an in-house platform.
I think I've spoken before that most customers have already done some level of integration with OTT providers, but quite often doing that themselves. But as they want to scale and want to offer more complex services and more complex bundles that takes two or three different services and puts them together into one offer, they really need a platform to do that. The best platform to do that is the Digital Vending Machine. Proximus have adopted the Digital Vending Machine. We used it to launch new services. We've then migrated their existing services over so they can offer these bundles and new offers to customers. Then the final stage is to launch even more services on top. I think a great example of how the DVM is commonly used within telcos, because this is not pure greenfield space.
Every telco has done some level of bundling, but they've done it in a very simple, very vertically integrated, very low functionality way. As they want to offer more services and more complex bundles, they need a platform to do that. That platform is the Digital Vending Machine. We move to Turkcell now. You can see we see a different level of scale here. Turkcell have 50 million customers, so significant customer base. They're using bundling really as an integral part of their 5G rollout. As they launch 5G services, it's not just about launching a 5G service with a higher data rate headline number. It's about how can you, as a consumer, use that service and consume the data rate and the bandwidth that 5G offers.
They're, as an existing DCB customer that's now moving over to increasingly offer bundling, they've offered, with their 5G services, a very heavy bundle. It's HBO, it's Netflix, it's YouTube, it's Amazon Prime, all packaged together with a few local entertainment services. So a very heavy bundle of services that can not only give the customer better value, but actually use that 5G capability that the customer's always purchasing. I think a different, but I think really interesting example of how you can use bundling to really promote and launch those telco first-party services, which is exactly what Turkcell's doing with 5G services. Quite often we spoke, and I just did that myself on the last slide. I think it's very easy to get caught up on the major SVOD services, your Netflix, your Disney, your HBOs, et cetera.
I think LinkedIn is a great example of the flexibility and the variety of services that the Digital Vending Machine can support. LinkedIn Premium is now available through the Digital Vending Machine to Odido customers in the Netherlands, and we have further launches planned. LinkedIn selected the Digital Vending Machine so they could quickly expand this offering across multiple markets and across multiple verticals, not just in telcos. If you look at MVNOs, so MVNOs are basically brands that offer a mobile service, but using somebody else's underlying network. Sometimes they're owned by the major mobile operators themselves and used to target a digital vertical, a different vertical. That's the example here with KDDI. KDDI, again, an existing DCB customer that is using bundling for their povo. So povo is their MVNO brand that's very much targeted at younger digital-savvy customers.
They're using bundling in a really interesting way. If you think about how prepaid generally works, it's people topping up with. So it's a very unpredictable revenue stream. There's very little customer loyalty. What povo are doing is using bundling to extend that and almost convert a prepaid customer into someone as loyal or as valuable over a lifetime as a postpaid customer. They're doing that by extracting one-year commitment from prepaid customers in exchange for a very compelling bundle. So again, a very different use case of how the DVM can be used. In Turkcell, we saw it really part of their 5G service launch, offering big heavy bundles to attract new customers to adopt 5G. Povo and KDDI are using it to basically extend the loyalty of customers and extend the relationship out beyond the traditional top-up interval over to a full 12 months.
Move to Belgium, look at Mobile Vikings. Mobile Vikings, again, another MVNO very much targeted at younger digital-savvy customers. They are using the offer capability in the DVM to launch a flexible bundling solution, allowing them to tailor their offerings to the different demographics of customers and different demands of customers that they have within their network. So really taking advantage of different capability within the Digital Vending Machine to provide more personalized services. I end now with an outlook to next year. As we look forward, as of to date, we have eight new DVM wins. The strong ARR growth, especially from existing customers that we saw in the first half, is continuing into the second half. The revenue quality is continuing to improve, and the restructuring, as Matt mentioned, of those high cost of sales routes is progressing ahead of plan and will complete this year.
The benefit in the business is clear, and the platform economics, I think, are very clear and increasingly coming out in cash EBITDA, and we will see that continue moving forward with the progress we have made in subscriptions cash EBITDA moving again into the second half, and that business is still expected to be cash EBITDA positive in fiscal 2027. At that point, we will have both two cash EBITDA businesses, the payments business as well as the subscriptions business. Trading remains in line with full-year market expectations. The opportunity for subscriptions continues to build, and we are very excited about the future opportunity and look forward to answering your questions, but also updating you on future earnings calls. With that, I will turn it back, and we will go to Q&A.
Perfect. Paul, Matt, if I may just jump back in there. Thank you very much indeed for your presentation this morning. Ladies and gentlemen, please do continue to submit your questions just by using the Q&A tab that is situated on the right-hand corner of your screen. Just while the company take a few moments to review those questions that have been submitted already, just like to remind you that a recording of this presentation, along with a copy of the slides and the published Q&A, can all be accessed via your investor dashboards. Guys, as you can see there, we have received a number of questions, and thank you to all of those on the call for taking the time to submit their questions.
Sukey, at this point, if I may just hand over to you to chair the Q&A with the team, and if I pick up from you at the end, that would be great. Thank you.
Thanks, [Jake]. Yes, if you have any questions for management after today's presentation, we have a Q&A feature on our investor center at bangoinvestor.com. Please get in touch. For today, Paul, we will start with you. Given the success in signing up new DVM licenses, when do you forecast that active users will reach 100 million?
Good question. I think what we have seen is the opportunity and hopefully in those examples of the Digital Vending Machine, if you look at Turkcell alone with 50 million customers offering a bundle with five, six, seven different providers in there. You can see the take-up of that really starts to scale. The growth that we will see in terms of the number of subscriptions is very dependent on when customers operate and launch these services. It tends to be a little bit seasonal. It tends to be either timed around big product launches like we have seen in Turkcell with 5G or around the starts of new sports seasons or around the Christmas period. It tends to be seasonal, and it varies globally.
I think what is really clear is the opportunity ahead and the ability to grow into that space, both with existing customers, and you see that growth in the ARR growth in the first half, but also in new customers that come on board. When those new customers come on board, there is a little bit of a lag in the time. It takes customers time to ramp up, not only in terms of testing the proposition and doing some A/B testing around the proposition that they are going to take to customers, but in bringing on additional content providers into the Digital Vending Machine.
The ambition is very much still there. The opportunity is very clearly there. It will arrive over time as operators launch new bundles, and that is why we are investing in the capability in the DVM to make it even easier for them to launch their bundles so we can get to that point earlier.
Lots of companies are moving from AIM to the Main Market. What are Bango's thoughts on this?
Yeah, I think you see that increasingly. There's just been changes to the new AIM rules in particular to try and encourage companies onto AIM and to maintain companies on AIM. I think as a board, we're continually looking at what's the right and the best listing venue for Bango, but really our focus is on execution and delivering results. Ultimately, the share price will correct. Listing venue is something we continually talk about on a regular basis, but have no plans as of today.
Matt, one to you. When is the net debt forecast to be cleared and turned to net cash based on internal forecasts?
Sure. I think we covered the net debt movements scheduled for this year. You saw the GBP 3.7 million of cash EBITDA being offset by the exceptional costs from the prior year lease and interest costs and some tax and working capital. As we said, the key point is a lot of that refers to the year before, which is why the movement in net debt forecast for this year is lower. If I guide people to the analyst forecast, you can see net debt achieving a similar reduction in the second half as it has in the first half. As we move into fiscal year 2027, the picture is a lot more different.
The increases in cash EBITDA that will come through, you'll no longer have those exceptional costs because as you can see so far year to date, the exceptional costs are zero, and you'll also have the normalization of working capital. In fiscal year 2027, you'll see meaningful de-leveraging within the business. Again, if I point to those analyst forecasts, they're forecasting net debt low single digits around GBP 2 million to end fiscal year 2027. So you can see that clear de-leveraging coming through from where we are today.
On amortization, what does the amortization profile look like over the next five years? Is there a significant step down in terms of the annual charges hitting the P&L in future years, and if so, when?
Yes, I think we covered this a little bit in the financial slides. Just to be clear, D&A is set to peak next year in fiscal year 2027, and then you will start seeing a reduction in D&A coming through the income statement. That reduction will follow what you have seen happening in capitalized development costs, which continue to come down year-on-year.
Question on AI, Paul. Presumably the speed of growth and popularity of AI has the potential to drive revenues and lower costs and overheads in terms of using AI tools within Bango. Are we seeing either of these trends in practice today?
Absolutely, and I think there are three key elements of AI as they apply to Bango and the Digital Vending Machine. First, as the question points out, there is an increasing number of AI services which are natural subscription services, and we are seeing these increasingly be included as part of telco and other vertical bundles. So AI services is probably our fastest growing category in terms of the number of subscribers that are signing up. SVOD still is the highest in terms of volume, but AI subscriptions like Gemini and specialist services such as some language translation services are growing very fast. So AI is a great, if you like, customer for the Digital Vending Machine in terms of being a subscription service that we can help content partners and AI providers resell and telcos and other verticals bundle.
Second element is on use of AI within Bango. We're very heavy users of all the different tools that are available across the entire company, to the point where Amazon asked us to speak at one of their summits about our adoption and usage of AI in a research and development environment. I think the way we use that in both testing as well as development was recognized by Amazon as being very advanced. We were fortunate for them to ask us to speak at their conference, and that allows us to be more efficient and to deliver more faster. The final element, which really wasn't touched on in the question, is how AI becomes embedded as part of the product. I think I probably talked previously about it at Mobile World Congress with a demo that had an AI chat interface into the Digital Vending Machine.
You can say, "Hey, I'd like to watch 'Stranger Things.'" Rather than click on a Netflix tile, you interact in a chat way with the Digital Vending Machine. As we start to look at the data of the things within the platform and how we can drive more adoption of subscriptions, that really is where AI really helps us, both in terms of the analysis of that data, but also in converting the actions into agentic workflows that happen automatically in the background. Yeah, absolutely AI is an important part of the Digital Vending Machine, and we fully embrace that across Bango, across all the three different elements that I just discussed.
Question on payments where revenue is normally heavily weighted to the second half of the year. Even after allowing for the restructuring, why does this no longer appear to be the case?
You want me to take that?
Yeah.
I'm not sure where it's visible that it's no longer the case. There is a seasonal basis for this payments business, as we've talked about before, that is weighted to H2. What I would say though is with the restructuring of the low margin routes that's coming through, that business has predominantly been more weighted than the rest of the portfolio to H2, so you probably will see a slight reduction off the back of that restructuring happening. But fundamentally, there should still be a weighting towards H2 within the payments business.
What level of recurring revenue can the DVM ultimately support before growth becomes increasingly dependent on winning new customers?
Yeah, good question. I think hopefully you saw in the sort of examples that I gave, and I just touched a few of the 40-something sort of customers that we have this year, potentially. If you look at across Turkcell and Proximus alone, 53 million customers. If half of those have three subscriptions, that's 75 million subscriptions, and clearly we're way away from that. So the headroom is really there. The great thing about the model is the model scales as our customers grow. So our customers bring new customers into bundling, and as those customers within bundling take on more services, our revenue naturally grows.
What we've historically, I think, seen if you go back a couple of years, is a lot of the growth in the business was depending on bringing in new customers, so adding more customers that started on the sort of the base tier of the license. What you see very much this year is the growth in those existing customers really starting to dominate. There's still revenue coming in from new customers, but the growth in those existing customers is very clear this year. That trend will move year by year, depending on what new customers come in and how existing customers grow. But I think that's a very clear indication this year that we have the right revenue model, we have the right business model, and existing customers are increasingly using the DVM to drive their own success, which ultimately drives our success.
How do you incentivize the retail consumer in order that they will demand bundling from their reseller?
That's a good question. I think the fortunate thing is we don't have to. If you follow us on LinkedIn or keep in touch with our website, you'll see we do quite a lot of consumer research into consumer behavior and consumer trends. The output of that research is very clear. People are demanding these services and are expecting these services by default. That level of demand and expectation increases as you drop down the generations. When you get to Gen Z, more than 50% of the people expect to get a video service from their telco and expect to get some sort of other benefits from their bank. So that demand, I think, is already there, and that's the great thing about this business, is the consumer demand is there.
As we said, not only is it benefiting the reseller, be that the telco or the bank or the content provider, the consumer's benefiting as well.
On the subject of growth and more subscriptions, what are the major future growth engines? Which sectors and are there any specific regions?
Yeah. Telco remains our primary focus. I think, as we've talked about before, it's where we're very well known as a brand. We are trusted. That's where the payments business really supports the subscriptions business. That's really the focus, and as we've seen from the answer I gave to the question a few questions ago, there's massive headroom both in existing customers, but also in terms of new customers. Say we're tracking 100 telcos globally, each of which have more than 4 million customers. That's 400 million new customers potentially that could be bundling through the DVM. So there's a lot of opportunity for us still to grow, both in existing as well as in new customers. Things like banks and retail and connected TV are all interesting verticals where we have small numbers of wins where we're starting to launch.
We'll see how those verticals bond. I think there are a few things to sort of bear in mind that reinforce why the focus remains telco, is firstly, telcos are very used to bundling these services. Banks and retailers less so. There's a natural drive within the telco sector that's not necessarily in some of the other verticals. Secondly, the content providers are very much focused on telcos and see telcos as a very valuable channel, and they're doing something very similar to us. They're experimenting in some of these other verticals. There's sort of less pull from the reseller because they're more uncertain about the business, and there's sort of less demand. But there's big opportunity. They will develop slower, they'll grow more slowly over time, but there's certainly opportunity there, and telco remains the big focus.
On payments, who took over the payment routes that Bango exited as non-profitable, and how will they make profit from them?
Yeah. I think when we talk about quality of revenue, as Matt touched on, it really is everything from the way that margin is structured through to the merchant that is ultimately delivering the service. Where we've seen those routes exit, they've just disappeared completely because if you think about the way the Bango platform work, if it's really not working for us, it's probably not working for the telco either, and it's probably borderline for the merchant. So where those have exited, they've just been turned off.
Matt, when will the growth in DVM ARR reflect in growing group revenues?
Yeah. I think it's starting to come through, but naturally there's a lag between ARR growth and reported revenue growth, right? ARR is a point in time measure, whereas revenue is recognized over the life of a contract and as the customers launch and scale. When we add ARR during the year, particularly towards the latter part of a period, we'll only recognize a proportion of that in reported revenue. I think the key point is that ARR growth we've already delivered provides increasing revenue visibility going forward for future periods.
If you look at the group revenue, the group reported revenue level, clearly that's being masked by the reduction that you see within the payments business, which as we covered during the presentation, you've got to look one level below that and see what's happening underneath, because that reduction is low-quality revenue that doesn't drive anything further down the income statement. It's the core payments portfolio that is driving the profitability within payments, and that revenue is growing. It's a long-winded way of saying it's starting to come through, and it's that leading indicator for the future.
Is there any ambition to grow payments, the payment segment, and why?
Yes, absolutely, and as I say, we will do that, but we will do it in a way that maintains high quality revenue and we think can grow and has opportunity. As I mentioned, I think earlier, we announced both LMT in Latvia and Telin in Hong Kong as new adopters of the platform to support their Google Play service. Absolutely, we are just selective because we want to maintain that sort of quality of revenue and the blue-chip merchants that are connected into that platform and remove the lower quality revenue that had the tendency to be very volatile.
Back to subscriptions, do subscriptions ever pay upfront cash ahead of the service?
You will need to get the question on the license tiers.
Yes, I am looking here as well. There is also a question around how the DVM license tiers work. Why don't we take a little time to talk about the revenue model. When we sign a new DVM customer, we split the revenue into two components. You will have a one-off setup fee to begin with, that kicks in obviously before the license, and then the license is revenue that covers the period of the contract. We think about that DVM revenue in two components. What you are seeing in the mix is that is increasingly shifting towards the license revenue. That is the more sustainable revenue, provides greater visibility, and we are no longer having to replace the level of one-offs that we did historically. Obviously, when this Digital Vending Machine launched back in 2020, those one-off revenues were a larger part of the mix.
They are increasingly now becoming a lower proportion of the mix as that quality of revenue improves.
We have moved between the growth drivers between payments and DVM for subscriptions. Is it possible to get payments business from DVM partners and vice versa?
Yeah, I would say generally it tends to happen the other way around, right? Because we have that trusted relationship, and I think DCB is a very established market. So there are not operators launching DCB for the first time. There are people that want to bring in services like we saw with Telin and LMT, but generally it is I would say the other way around. You saw that in the examples, right? Turkcell and KDDI, both DCB customers have that trust in Bango, understand the platform economics, understand the benefit of the platform, and so as they move into bundling and look to offer bundled services, naturally look for Bango to extend the relationship that we have with them.
Matt, on financing, do you face any issues in financing the debt or rolling it over in a higher interest rate environment?
Sure. We talked about, I think, deleveraging a few questions ago. With the cash generation in the business, net debt is clearly going to reduce. We have to remind people we have got two debt financing sources. We have got a shareholder loan from NHN that is a fixed interest rate, and that will start to amortize quarterly from the end of this year. Then we have our revolving credit facility with NatWest, where the interest margin on that facility is actually linked to the leverage. The cost of that facility is going to come down as the business continues to delever. That facility was put in place a little over 12 months ago and still has a little under two years to run. No, to answer the question, and hopefully those dynamics are clear in terms of the way forward from here.
The 119% net revenue retention suggests you are seeing quite meaningful expansion within the existing DVM customer base. Could you give a little more color on what is driving that expansion and whether it is primarily more subscribers, customers adding more content partners, or broader adoption of the platform? How do you think about the runway for growth within the installed base?
Yeah. Good question. We have touched on a little bit of this, I think as we have gone forward. I think it is a combination of all of those, and there is no one single answer that applies everywhere. It is very different customer by customer. You saw in Turkcell where they are launching 5G with a bundle that immediately includes five, six, or seven subscriptions. There the growth is very much driven by users coming in, but each user coming in brings five to seven subscriptions into the platform. In other operators, it is where they are adding additional content into the offer. We are working with pay TV operators who bring in additional OTT content as part of the bundle, and so there it has been driven up by the addition of these new content provider bundles.
Hopefully, as you have seen, if you look at the sheer number of telcos that we cover and the sheer number of customers and then compare that with the subscription, there is a lot of headroom to go, right? Both in terms of if everybody only had one, there is significant headroom to grow. The great thing about the revenue model is it scales with that growth.
This question includes a nod to a powerful presentation, so well done. On share price, until today it has been dull. Cash is flowing as predicted, so what excuses have institutions in ignoring Bango?
Yeah, good question. Probably, I think, a nice one to end on. I think there are a couple of answers. I think partly people want to see the results, and we are doing what we said we would do, and I think you can see that very clearly in these results. I think proving that platform economics on the Digital Vending Machine that have driven that huge increase in cash EBITDA that is on track to become profitable next year dramatically changes the nature of the business. If you look at the improvement year-on-year, GBP 4.3 million improvement in cash EBITDA on the subscription side in the first half, which is a combination both of that growth and the growth of the platform leverage, plus the structural cost reductions that we took action on in fiscal 2025.
I think that is the next proof point people were looking for, and I think that is very clear in these results. We have also had the Saba overhang created. I think the good thing about that is now played out and is over, and then there are new institutions who have taken a starting position on the register. I think everything is arriving at the right time. I think our delivery, things cleaning up outside of our control in the market, and I think the proof points I think are very clear in these results and will be increasingly clear as we move towards full year 2026 and into fiscal year 2027.
With that, thank you very much for everybody's time. We really do appreciate your questions and your engagement. Sukey mentioned earlier, if you have any follow-up questions, you can submit those very much via the investor website. We do appreciate the engagement. Thank you for your ongoing support. Hopefully, you see the results of the actions that we have been taking in the results, and we look forward to updating you with more news flow as we move throughout the year. Thank you very much indeed.
Perfect. Paul, Matt, Sukey, if I may just jump back in there. Thank you very much indeed for addressing all of those questions that came in this morning and for updating investors today.