Good afternoon, and welcome to the Boku half-year results investor webinar. If you can just bear with us a few moments while everybody joins, that would be much appreciated. We've got quite a few people joining this evening, and it does take thirty seconds or so for everybody to join. I see the number of attendees is still going up, so just bear with us a few moments longer, and we'll get started. Okay, it is 5:31 now, so welcome to the Boku half-year results investor webinar. With me today, I've got Stuart Neal, CEO, and Robert Whittick, CFO. Rob and Stuart are going to take you through the presentation, after which we'll have the opportunity for questions and answers. I'd like to thank those who've sent in questions in advance. Those are really appreciated.
In terms of questions during the webinar, unfortunately, given the number of people that we've got in here tonight, it's not possible to go to you individually, ask you to unmute, and put your questions directly to Stuart and Rob. But we do welcome questions. If you have anything, please, can you use the Q&A button at the bottom of your screen? Type your questions in, and I will put them to the team after the end of the presentation. Okay, without further ado, I'll hand over to Stuart to take you through the presentation. Stuart?
Thank you, Tim, and welcome, everybody. Thanks for joining us, particularly those of you in the U.K. This is sort of the graveyard shift, I'm sure. Look, it's a pleasure to walk you through our interim results presentation. For those... Some of you may be familiar with the story, but for those of you who are not, let me just remind folks what it is that Boku is here to do. So Boku's vision is to be the world's best localized payments partner for global commerce, and I will come back to this later in the presentation and explain a bit more what I mean by that.
But the way that we do that and the way that we achieve that vision is all around simplifying expansion for our merchants, and we work with some of the biggest tech giants in the world, and we provide them with seamless access to some of the world's most popular payment methods. And so I will talk a little bit about the strategy and how we're developing towards that later in the presentation. But before I do that, let's get to the results, and I want to introduce you to Rob Whittick, our CFO.
Rob joined us recently, and, you know, credit to Rob, he is presenting a set of results that effectively happened before he joined the company. So credit to Rob for being able to do that. But Rob, please, why don't you say a few words about yourself and why you joined Boku, and then let's get into the results.
Wonderful. Thank you, Stuart. Good afternoon, everybody. Delighted to be here to present my first set of interim results. As Stuart mentioned, I've only joined recently, so I can't take any credit for the great results that you are seeing. So briefly, a little about me. Before joining, I was at NatWest for over 25 years, in a variety of roles, mainly finance director roles within treasury, Global Banking and Markets, including a stint as CFO of Asia Pacific, and then latterly as finance director for Commercial and Private Banking. In addition, I did do two chief of staff roles, and the latter of which was as group chief of staff.
I think it's fair to say that I've, I had a new role every two or three years, so I picked up many, experiences across my time at NatWest, a strong sense of what finance should drive in terms of outcomes, developing and managing strategic and operational outcomes, and, as I say, understanding several functions and businesses during, as I ran those across my time. So I do see tremendous, opportunity to apply my experiences and perspectives that I picked up, in my time at NatWest. So I guess, just briefly, why join Boku? I must say simply a fantastic growth opportunity.
I met Stuart, who talked to me about an expansive and exciting growth strategy, and I could see that strategy was backed up well by an amazing set of merchants, an expanding set of products and geographies, together with an increasing issuer network across the world. That, of course, that track record, or the existing track record of growth, is evidence the strategy has and is working. So as a result, I'm genuinely excited to be here and look forward to helping execute the strategy. With that, turning to our results. So first up, a summary slide, where I just wanted to try and draw a thread through the results to show you how we have performed in this half. So starting with monthly active users, up 30% half-on-half.
Those in turn have driven up total payment volumes 16%. Although, if you take that on a constant exchange rate, they are up 26%. Take rates, or our margin, is then up 7%, and when you take those two items together, you can see those drove revenues up 24%. But again, if I look at a constant exchange rate, you can see the revenues are indeed up 30%, in line with the increases in our monthly active users. That, in turn, has turned into an adjusted EBITDA of + 18%, which includes meaningful investment in future revenue streams and indeed delivers an adjusted EBITDA margin above 30%, and we expect to maintain that margin above 30% going forward.
Finally, the outcome of all that activity, our own cash, which has grown in the period up to GBP 75 million. I'll look in each of these measures in more detail. As you can see on the slide, we've grown our monthly active users, both in total and across other LPMs. So just thinking about where does that growth come from? We have delivered a meaningful number of new merchant connections in the period across or over 50 new launches across DCB, digital wallets, and A2A products. We've delivered those across many jurisdictions, including the U.K. and Europe, Asia, Middle East, Africa, and both North and South America. And we have done that with a number of our merchants: Google, Agoda, which is part of Booking.com, our first online travel agent, Netflix, Sony, and Sky, among many others.
That increased activity has driven TPVs to GBP 5.8 billion in the period. Finally, our half-on-half take rates have increased to 0.81%, largely driven by a changing business mix in the period, where we have seen increased margins in digital wallets. It is these higher TPVs and higher take rates that have led to our continued revenue growth to GBP 47.3 million in the period. As you know, or as you know, our business does have seasonality, and then in the second half, we will see Black Friday, we will see Singles' Day, and together with the holiday season. In addition, we will see at least one significant game launch.
All of those historically have contributed to a better performing second half, revenue-wise, and we do expect to see the same again this year. In terms of the revenue split, our DCB product continues to show strong growth, up 14%, half-on-half, driven by demand from existing merchants like Sony and Tencent, new merchants like Yalla, and in new jurisdictions like Saudi Arabia. As I say, we have seen significant growth in our other LPM products, digital wallets, and A2A, which now represent 25% of our overall revenue. Again, that growth comes from existing merchants, together with new merchants in the period.
We have invested significantly to support our merchants use other LPMs globally, allowing them to access ever-increasing numbers of customers, and also that's beneficial to us because as we grow the other LPM business, that diversifies our revenue stream. So on to Adjusted EBITDA, the increased revenues, obviously supporting, as I've mentioned, both investment in the business and an 18% increase in Adjusted EBITDA to GBP 14.2 million. And as I say, we have maintained our EBITDA margin above 30% and expect to maintain that margin above 30% going forward. I should say, we did post a small operating loss for the period of GBP 0.4 million, and I would highlight the following key factors in terms of contributors to that loss. We have accelerated the amortization of a legacy platform.
Our share-based payments have been driven up by increases over time in our share price and the number of awards granted. Then finally, FX losses, mostly related to the revaluation of non-U.S. dollar balances. Boku does remain debt-free and continues to generate positive cash outflows. We had an RCF. It matured this month, and we have not renewed it, and it was actually not drawn at any period. In terms of our funding position, Boku's own cash, as we call it, as it is calculated in a manner that seeks to exclude merchant cash in transit, that position has increased to GBP 75 million.
In summary, as I look at the results, half-on-half, the monthly active users, as I say, are up 30%, TPVs up 16%, revenue up 24%, and adjusted EBITDA up 18%, noting that that includes investment in future revenue streams. Then finally, our own cash up to GBP 75 million. Both positive progress in across the whole business in H1, and very well set up for H2 and another good period. With that, I will hand back to Stuart.
Thank you, Rob, so a great set of results. Really, really, really happy with those numbers. Let me just do a quick recap for you on our strategy, and then, and then I will circle back and tell you how we're progressing on some of those, the initiatives that I talked about last time that drive the strategy, so around the world, there is an ongoing secular shift away from traditional payments products that you may recognize, such as debit and credit cards, towards the emergence of what we are calling local payment methods, and within that definition, we include direct carrier billing, DCB, which is our heritage, but also digital wallets, effectively a store of value that is used to make a payment through your mobile phone, and then increasingly and, and going forward, account-to-account payments, where the source of the fund is coming directly from your bank account.
Boku has already accumulated over 300 local payment methods across our network, and so the fact that there's a macro trend, you know, is a tailwind that's driving our business. Why do we do this? Because our customers need us to do. Boku is fortunate and privileged to work with some of the world's largest tech companies, and those companies are still looking to grow their businesses internationally. And what Boku does is to simplify access to local payment methods for these companies. Why do we believe this is important? Here's a bit of research that Juniper did that suggests that global e-commerce is going to grow in the next 5 years up to a competitive value of $10.6 trillion. So it's a huge market.
But what's really interesting is when you start to get under the covers and look at the change in mix that makes up that $10.6 trillion. And it's predicted that by 2028, 59% of those transactions are gonna take place using a local payment method. Now, just remember, Boku already has 300 local payment methods connected to our platform. And you can see here in the chart on the bottom right of the slide, what is gonna change in the mix? So fundamentally, a shift is happening globally, away from credit cards and debit cards, towards wallets and A2A payments. Again, think about our strategy. Boku is aggregating A2A payments and wallets on behalf of our customers. So we're very much playing into a huge global market, and we have a really, really good start.
Let me just recap some of the initiatives that I talked about last time and just give you a sense of progress. One of the things that is key to our success is clearly building out our network of local payment methods. Frankly, this is not a flag-planting exercise where we're just growing numbers of LPMs. It's about getting the right LPMs launched, the ones that really matter. In the first half, I'm really pleased to say that we launched ten new payment methods across six countries, and that comprised over 50 connections for our customers. Great progress in terms of building out the network. Within that number was some significant launches into A2A. Remember the chart that I just showed you, a big secular shift in payment mix, away from cards towards account to account.
So in the first half of this year, we managed to go live with account-to-account payments in Poland, in Indonesia, and also in Vietnam. We were also awarded our license in India to be able to process UPI, and we expect our first merchants to go live in the second half. So account to account, incredibly important to our strategy, and we're making good progress. Within all of that, processing payments is only sort of the bit that happens above the waterline. Beneath the surface, you have to also be able to move money. So accepting payments in a given market is only useful if you can capture that currency and be able to settle that currency back to your merchants.
And so we are investing a reasonable amount of money in building what we believe will be a differentiated real-time treasury platform, so that in the future, our merchants can receive currency in any given market, and we can settle to them in any given currency that they want, and we can do so at advantageous exchange rates. So it's a strategic investment that will straddle into next year, but we're making good progress. We have a platform that's already being implemented, and we have a world-class team that's now in place to help us do that. I think about treasury as one way that we add value over and above just making payments happen, and that's hard in itself.
But one of the ways that Boku adds value over and above the payment is being able to offer what we call marketing via local payment methods. And what we mean by this is, through our network to our supply sources, we can access around seven billion pairs of eyeballs. That's a big marketing channel, and so marketing through payments is something that we think is incredibly interesting, and our merchants tend to agree. And so, over the first half of this year, we've extended a lot of our existing bundling programs. And a lot of those run with our DCB partners, our mobile operators. We've also extended our partnerships to include a bank and also a cable TV company.
And so our knowledge and understanding of how to run marketing programs through partners on the supply side is proving a really effective way for our merchants to be able to grow their customer base. So really important, marketing via LPMs. But look, we have ambitions to grow Boku into a large global payments player. And to do that, we need to expand our merchant reach, and also, we need to therefore branch out of where has been our home ground of digital streaming and gaming. And we're now live, and in the first half, we went live with an online travel merchant. So now people in Vietnam can use their local payment method in order to buy their holidays online, which is really, really cool.
We are also live supporting a large global tech company to enable them to offer prepaid advertising to small businesses who can pay using their local payment method. So the use cases and the target market for LPMs is growing, to the extent that we are scheduled to be going live with our first major online retailer in the second half of the year. So really exciting development for the company, coming in the second half. And then finally, as we think about growth, not only do we want to open up the target addressable market, but also our go-to-market strategy needs to evolve. And so we're looking and talking to a number of potential channel partners about how do we distribute Boku's incredible network through third parties to be able to access a much, much bigger pool of merchants?
So again, lots of ongoing conversations there, things that I would like to come and talk to you more about in the earlier part of next year. Bigger ambitions, you know, clearly require bigger infrastructure, bigger foundations, and I also believe, you know, going forward, we needed to bring in some additional skill sets to the company. And so while we've been incredibly successful in getting to this stage, you know, and we've managed to retain in that time some incredible leadership talent in the likes of Adam, Mark, Keegan, and Laura, we also wanted to expand, you know, the executive gene pool, if you like, to include people that have worked for scale businesses. So as we grow, you know, we know what we're doing, and we can scale effectively.
Rob, who you've met, comes to us from NatWest and has seen how global businesses can operate. Vic comes to us, formerly the Chief People Officer at AO.com, with a huge amount of experience in developing talent pools and developing the people. And Paul Jarrett comes to us from Zepz, so WorldRemit, where he was running a sophisticated global banking and treasury set-up, and you know, our hope is that he will do exactly the same for us. And so I'm really delighted to say that this new leadership team is exactly the team that we need in order to get Boku to achieve the vision that I set out at the beginning of the presentation. So in summary, where do I think we are at the half year? You know, I'm really pleased with the half year set of numbers.
As Rob alluded to, user numbers are up. That means more people are coming to our merchants via the Boku platform. We're expanding our network. We're building the foundations to be able to grow an incredible treasury, and settlement, and money movement capability, and we have our new executive team in place. All of that on the back of growing revenues, growing take rates, and EBITDA is above 30%. I think we're incredibly well-placed as we go into the second half of the year. And when I think about the second half of the year, I just come fresh on the back of two consecutive months of record revenues, so our momentum is strong. You know, the company is on a roll. We have some material merchant launches in the second half that I'm really excited about, including our first launches in online retail.
With all that said and done, I now feel extremely confident that we're going to achieve the market expectations that you may have seen out there from the analysts for the whole year. I want to be able to put more color on this strategy for everybody, and so what we are planning to do is to run an updated capital markets day in the first half of next year, where we'll start to build and pull all of these relevant threads together, and people can get a sense of, you know, yes, we have this incredible ambition to transform the business, but how are we going to do that? So I'll talk a bit more detail about that in the earlier part of next year. In the meantime, let me say thank you for dialing in to the call, and I will now pass it over to Tim, who can handle any questions. Thanks for listening.
Thank you very much, Stuart. Thank you very much, Rob. Stuart, we've got various questions that people have submitted in advance.
Okay.
The first one's probably for Rob, and I'll read it out as received. The question says: "I respect that you talk of adjusted EBITDA as the main profit number to focus on. Would it be worth you referencing adjusted PBT and adjusted EPS in future statements, too? A few investors still mistrust adjusted EBITDA, as there's often a big difference between adjusted EBITDA and adjusted PBT. In your case, it's actually a very small difference, especially as income... interest income is growing. So is that an opportunity to include those measures in your reporting as well as the focus just on adjusted EBITDA?
Yeah, I think, the first thing I would say, obviously, we produce a GAAP P&L, so a standard P&L in terms of what you would expect to see from any company. And then the reason we use adjusted EBITDA and adjusted EBITDA margin is just to try and give a sense, both versus our peers who would do the same things and for our investors, just a sense of what we think are the real measures of the business. But we do produce, as you can see in the RNS and in the any other documentation we publish today, we do produce a standard profit and loss, if you like, that would come to an operating loss or profit before tax and a profit after tax. So I hope between the two of them, that people have all the information they would need.
Thank you, Rob. The next one, the question says, "I understand we're in an investment phase at the moment, and we should expect EBITDA margins to remain at or above 30%." The questioner just wants some more clarity on sort of will this investment phase continue sort of beyond this year through 2025, or will we, over the next 18 months, see the benefit of further operational gearing as the investment maybe decreases?
I'll take that. Yeah, I think it's a fair question, and I do appreciate that investors are very patient in the never-ending cycle of investment. You know, and I think that investment is never something that ends. But this specific investment phase that we're in is about making sure that we have the tools, the systems, the processes, and the products that we need, you know, to 5x the business without having to 5x the number of people we employ.
And so, yeah, I think the answer is a simple yes, we would expect to see some accretion in EBITDA margins beyond 2025. We will never stop investing, but I also appreciate that at some point we need to start delivering some gearing back to our investors. So, you know, we are doing the work now to make sure that we can use machines effectively rather than, you know, have to increase our headcount in line with revenues.
Okay, thank you. The next question is a related one. Are there any significant resource constraints on Boku's growth from either a people or technology perspective? Is there a level you can get to where there's a big step up in investment needed, or is it incremental versus revenue?
Not significantly. I mean, we're fully cloud-hosted, you know, and so things that you would expect might be limiting factors aren't typically so. You know, for the phase of the strategy that we just outlined, we believe that the investment we're making now will make sure that we can scale to that sort of level. You know, what happens beyond that, you know, who knows? But, you know, in the next sort of five-year sort of time horizon, I do not foresee any sort of hidden or sort of step change in investments needed to help us scale. I think we're doing all the right things.
Thank you. You talk about the potential addressable market size, particularly on online retail from the Juniper Research. The question here is asking about sort of addressable market of local payment methods. Talk about the Boku network at the moment being connected to 300. What is the sort of short, medium, longer-term target for the number of LPMs that you would like the Boku network to be connected to?
We don't typically set those as targets because having a sort of thousand LPMs that no one wants or uses would not be super helpful, so we tend to think about it in a more calculated way, which is, you know, where do our merchants need us to connect to? Where is it likely to have the most impact, so the most users or the most relevant users?
You know, so it tends to be, you know, maybe we need an LPM to complete a market, and we would typically have the three or four most popular LPMs in any given market, and that might be wallets and local cards. For example, in Nigeria, you might see Verve, but we don't set ourselves a goal to hit so many LPM launches in a given period. It tends to be driven by demand, and that determines what supply we need. Hopefully, that makes sense.
No, no, it does make sense, and it's understood. But, a related question on the network, are there any significant gaps that you see at the moment, either geographically or payment types?
We are in process of getting connected and live in Brazil on Pix.
Yeah.
You know, I was hoping that would be this side of Christmas. It's more likely to be the other side of Christmas now, but that's not too far away. I certainly think, you know, LatAm is somewhere we're focusing a lot of our attention, and we should be live in a number of markets in the earlier part of next year. I think Europe is going really, really well, so we have some, you know, exciting connectivity in Europe. I think Africa selectively, you know, we should be live in Nigeria this year, maybe South Africa or early part of next year, but we're not flag planting in Africa to get maximum coverage, so I think there's a few select markets outside of the ones we already have.
I mean, India, I mentioned we've got our license, and our first merchant launch is coming up soon. So we are filling in the gaps, put it that way. Within the next six to nine months, we would have filled in many of those gaps.
And I've got a couple of questions on, you know, consolidation. There are a number of people who are looking to consolidate wallets and A2A transfers in Europe and elsewhere. Is that an opportunity or a threat to Boku? Does it make life easier, or does it make life more difficult?
Look, I think in Europe, there's been quite a lot of investment in what we call open banking which has driven to sort of maybe more assets than there is demand, so that will drive some of that consolidation. I think in the world of LPMs, it's still fairly nascent, and so I'm not seeing a huge rush for consolidation in other parts of the world. It might be a thing that's more specifically in Europe. That said, I think there will be M&A, and I think some of the big payments companies who stand to lose from this will be looking for people to partner with or people to buy, and so that might get quite interesting, but not something that's worrying us right now.
Okay. You speak of M&A. I've got a question that says: What are the plans for Boku's ever-growing cash balance?
Yeah, for sure. So short term, we will continue to invest in our business to help our customers grow, and then obviously we'll grow with them. So short term, I would definitely say that. I think if the cash pile got meaningful, the second thing we might do is help facilitate our own growth. So if we wanted to go into a market where we didn't have a license, we could obviously maybe purchase a small operation that had the license we needed. Beyond that, I think to Stuart's point, the cash pile would have to grow quite meaningfully to look at substantial M&A for us. So I certainly think short term, we will use it to continue to invest in our platform, be it in-house or to buy other things, small things that would help us grow. So that's what I would say in the short to medium term.
Thank you, Rob. Next questioner wants clarification on the comment regarding the retailer. Can you say more or repeat the comment? E.g., is this a retailer of physical goods? And if it isn't, is the online, excuse me, online total addressable market misleading unless it specifically relates to online payment of digital goods only? So is Boku moving into physical goods, I think the questioner is asking.
The short answer is, yes, we are. The reason we're able to do that, well, is there are a number of reasons we're able to do that. Firstly, because we are now fully licensed in markets to move money where regulated payments are a requirement. Secondly, because, you know, moving towards digital wallets and A2A, it makes the cost of being able to use LPMs relevant to the retail space more aligned. And so, you know, margin-sensitive online retailers won't want to pay, you know, heavy fees, and so A2A makes that very interesting as a way of you know, undercutting card interchange, for example. So yeah, absolutely. This is online retail in its broadest sense. Online TVs, whatever it is you might want to name.
Right. Well, thank you very much for the clarification there. We are just over the half-an-hour mark, and I think that's the end of the questions that people have typed in and have sent me. So unless anybody's got typing skills and can type something very quickly, we'll call it there. But I'd like to say thank you very much to Stuart and Rob, but in particular, thank you very much to everybody who's joined this evening. If you do have any further questions, please get in touch. boku@investor-focus.co.uk is often the best way, or contact details are on all the announcements. Give us a call, and we're delighted to have a chat. So thank you very much, everybody, for your time, and enjoy the rest of your evening.
Thanks, everyone. Thank you. Thank you. Thanks, Tim.