It was back in 2013 that I paid my first visit to Bango’s HQ in Cambridge, where on a cold and wet November afternoon I met up with co-founder Ray Anderson.
Then, Anderson, who along with Anil Malhotra founded the company in 1999, talked excitedly about the future of the internet, smartphones and a substantial scalable opportunity ahead for the Bango business.
The shares at the time stood around £1.80p, which is more or less where they sit today, despite the company now looking an altogether more advanced proposition than back then and where those previously outlined opportunities are very much apparent.
Indeed, although a significant move into and a delivery of notable cash generation and profit as yet appears to have been a long time coming, Anderson’s vision, predictions and forecasts then, are now showing signs of really coming to fruition.
Having stepped back to the role of Executive Chairman, Anderson handed over the mantle of CEO to Paul Larbey, who moved into the hot spot in 2020.
Since then, much has happened across the business with an acceleration and evolution of those opportunities, for what is an often misunderstood growth story prospect.
Admittedly, the transition into profitability and on a growing sustainable level has thus far eluded Bango in terms of delivery, which in turn, has along the way tested investors' patience. However, another closer look today reveals a business now very much ready to make a firm impact on the all important profit and cash generation, as it moves into what represents a serious step change for the business.
Having last week visited the companies HQ on the Cambridge Science Park to meet up with both Larbey and CFO Matt Garner, I was extremely keen to glean as to whether there was a firm underlying confidence in meeting the current broker forecasts, which include some extremely impressive growth numbers ahead.
Suffice to say, both the key players here expressed the belief in hitting the expectations currently out in the market, which if delivered over the next twelve-eighteen months should surely elevate Bango’s shares considerably higher and nearer to the broker’s target prices.
This sees Singer currently looking at a £3.40p valuation with Stifel opting for a £3.15p figure, both of which are a good way ahead of the current share price.
More on the numbers and expectations in due course though, as for the benefit of any investors taking a look for the first time, or others requiring a refresh, it is perhaps worth having a brief run over the business and its model.
In its early days, the company set out on the journey as a pure carrier billing provider which subsequently saw via its own platform, the enabling of mobile users to purchase apps, app content and actual physical goods, which were then charged to their mobile phone account with Bango taking a very small percentage.
Since then, just as the smartphone and all that goes with it has burgeoned and evolved, so too has Bango where it has continued on its own journey that now sees it standing as a lead player in what is a vast and extensive global market.
Today, it has differing but complementary facets to its operation which sees it in part now deriving revenue through a SaaS element of the business that is being driven by its Digital Vending Machine offering (DVM).
Additionally, within the wider services provided across its platform there is not only the provision of one-click online payment and digital distribution via third party resale partnerships, but revenue generation derived from its own amassed relevant data.
The latter helps marketers find the customers they need or wish to engage with and purchase their products, as Bango provides valuable information within and across the supply and delivery chain.
Already well established with and aligned to many major names for its services, such as Google, Amazon and Microsoft, the company is now firmly entrenched as a global player of choice and recognition in what is a massive commerce market that continues to grow exponentially.
However, the most recent excitement that is bringing about a significant and game changing opportunity for Bango is that of Super Bundling.
This is the provision of the bundling of multiple subscription services, that is aligned to the aforementioned Digital Vending Machine (DVM) technology offering.
In simple terms, the Bango platform brings together numerous subscription services into one place, enabling a single monthly bill that is typically aligned to a specific Telco.
The concept provides much more choice and flexibility to consumers, with an extremely easy to understand selection and billing process that has, in part, actually been driven by consumer led demand.
In order to hear more on this and other aspects of the business along with the prospects going forward, both the CEO and CFO were happy to expand for me.
Looking firstly at the recently announced Interim results, Larbey says that the highlight of the first half wasn’t actually in the numbers achieved which were impressive enough, but the new DVM deal that was announced with another top 5 US Telco.
This was important both operationally and strategically for the company, as the Telco in question is a top US operator, which now sees Bango actually working with three of the top 5 and that in turn now provides access to more than two hundred million consumers.
Although that isn’t reflected as yet in the numbers, it does however provide for a vision of the revenue potential, along with the path to serious growth and profit.
Worth noting, is the ARR element within DVM which increased 63% YoY to $5.6m and is up 14% on Dec 22, suggesting traction here is building and gathering pace.
Larbey also comments on Bango as a whole, “the business overall is performing well, the payments business continues to grow and the digital marketing business is also performing as we expected.”
In the Interim numbers, the company delivered revenue growth of 88% at $20.3m of which broker Singer estimates 25% being organically generated, leading it to conclude that the company is now set up for a transformational second half.
Following those first half numbers, Larbey confirms to me that the historical second half weighting that typically sees a 60% bias will again come through and that should provide confidence for investors in a successful full year outcome.
This bias I am told is down to a number of factors such as first half launches taking time to feed through, alongside big events and volume generators such as Prime Day, Black Friday, Christmas and also New year in Japan.
Of course, given the current economic climate one wonders as to whether there is likely to be any issues that could derail the growth story, particularly when it comes to the subscription space.
The CEO is happy to address this key aspect and says that whilst there is clearly a consumer price issue along with talk of people cancelling their subscriptions, at Bango they haven’t seen or experienced any evidence of a downturn.
“If anything,” Larbey adds, “it’s the opposite, as subscriptions are continuing to grow. There is a lot of hearsay about people cancelling subscriptions, but our data suggests the opposite.”
CFO Garner also points out an element of similarity to 2020 when people remained at home, as in now many are cutting back on the likes of restaurant visits or outside entertainment events which translates into consumers being more inclined to stay in and watch a movie or any other streamed event.
Additionally, Bango is not a UK focused business, rather, it is a global one with the US and Japan being its main region generators, so it needs to be assessed in that context.
And it is perhaps also worth noting that in the US, whilst the average adult had two subscriptions back in 2017, this is now forecast to increase to close to five in the next few years, highlighting the ongoing appetite.
Although many people will perhaps think of subscription services purely within the realms of Netflix or Sky movies, there is so much more to it than that, with Sports, Digital Music, the Spoken Word such as Audiobooks and Podcasts along with Video Games. Fitness, Wellness and Health also feature along with Delivery Services and much more.
Operating in a vast global market and reaching across many areas of commerce, it is perhaps S. America though at this point arguably personifies Bango’s successful reach and penetration where Garner says the region has really picked up for them which has benefited considerably from Bango’s acquisition last year of Docomo Digital.
This business, which was one of its largest DCB competitors, was acquired last year at a potential snip of a price as Larbey expanded. “It was actually one of those acquisitions that perhaps looked too good to be true and it is delivering as we said it would with synergies and cost savings coming through.” He adds that Docomo Digital’s previous owner had divested it with a clear view of finding the best suited partner for it, which involved a vendor selection process that ultimately saw Bango emerge as the ideal suitor.
Within the deal, it brought to Bango new relationships with Telefonica, America Movil and Deutsche Telekom, whilst further extending existing relationships with Vodafone, Softbank and Airtel India.
Additionally, an extra $16m of revenue is now being delivered annually, whilst a further $3.5bn of end-user-spend is also apparent, where the latter on its own far eclipses the end-user-spend figure from when I first met Ray Anderson, which then stood at just £15.6m.
That latter number perhaps serves as an illustration as to the significant progress that has been made here, even if the current share price would appear to suggest otherwise.
Given the notable momentum that appears to be building now, despite a difficult economic backdrop it is perhaps not surprising to hear the CEO himself sounding a confident note on prospects.
“By the end of this year, the integration will be done and moving forward it really puts us into a very profitable and cash generative 2024.”
Within the now expanded business there is also Bango Audiences, another more recent aspect of the widening business, which in a previous conversation I had with management a couple of years ago had been earmarked as a future positive contributor for growth.
Commenting, Larbey says, “there are two things here, firstly we refocused it a little bit within the business and secondly, the DVM opportunity has been much bigger and more immediate than we probably previously thought. So, as a company we have been very much more focused on that, which is exciting and that is really where all our effort is.”
That said, Bango Audiences continues to progress, Larbey informs me, with the previously outlined targeting those that spend more money remaining a key theme, although they are continuing to look at ways of further scaling that part of the business.
Within the Audiences offering which revolves around utilising Bango’s rich data in order to assist merchants with growing their customer base, there has been a drive to expand further into brand based marketing.
But, with DVM proving to be the real driver at present, it was worth hearing a little more on this important and growing aspect of the business from the CEO.
There has, he tells me, been a massive step up in the number of customers since 2021 which has in part been driven by what is regarded as a very well known and trusted brand.
“Telco’s are actually natural bundlers of third party services and they often did their own bundles in the past and we have a product that is very much focused on that, with a customer base and a trusted brand that is in the right place at the right time.”
In terms of standing out from any competition, Larbey says that Bango has an incredibly feature rich platform in regards to creating what is appealing to customers along with an insurmountable number of merchants that they are connected to which collectively sees it feature ahead of others.
Carrier Billing of course continues as the backbone at Bango and with the Docomo Digital acquisition, integration and contribution real benefits should now become clearly visible.
The payments business importantly continues to grow, with new routes added for Google along with now up to 70 Amazon Prime bundling connections. With further news likely to continue to flow, then Bango appears well placed.
So, with a number of positive factors now collectively driving the numbers, it is perhaps worth taking a look at the broker forecasts for the second half of the year and the expected full year figures, along with those of the next full year too.
Looking at Singer, the expectation is for full year 2023 revenue at $49m with adjusted EBITDA of £12.6m and adjusted pre-tax profit of $3.4m with EPS of 4.4c. However, it is next year that we see a significant and potentially game changing move on the dial.
For 2024 full year, revenue is expected to increase to $57m with $27m EBITDA and pre-tax profit moving sharply higher to $17m giving EPS of 21.8c.
Such a transition understandably raises the eyebrows and it also makes one question as to whether this could prove a one off and the following year could dip back.
Larbey says, “I think we will now go into a period of accelerating growth. At the moment what we’re doing is logo grabbing and that will take us into the next capacity growth phase through 2024 into 2025 and at that point, I think we will see the growth take off.”
The CEO adds, “I think we will now go into a period of accelerating growth. At the moment where what we’re doing is logo grabbing, this will evolve into growth from capacity through 2024 into 2025 and at that point, I think we will see the growth take off.”
Broker Stifel also covers Bango so it is worth taking a look at its forecasts for some balance and consensus.
Looking ahead to next year Stifel is also anticipating revenue of $57m and EBITDA at $27.3m, but the pre-tax profit at $14.3m, which sees EPS of 18.2c.
Either way, the numbers suggest a significant and marked step up with the DVM product set to really drive the momentum.
Stifel also comments on this area, “Once launched, growth should be driven by capacity growth where license fees are expected to increase as telcos broaden the subscriptions offered and more consumers take up subscriptions through their telco. We expect this to be the main driver of organic growth in the near term and longer-term, management think this could be a $100m + revenue opportunity (vs June’ 23 ARR $5.6m).
Concluding, Larbey says that there is a lot of action going on, but they aren’t always in a position to talk about it, due to client confidentiality.
That said, he sounds an enthusiastic note on the years ahead with increasing market presence close to home in Europe, along with Japan, Korea and Australia and also across the Middle East and Africa.
Organic growth remains the focus with a seemingly extensive runway, although if something came along that was worth Bango acquiring, then another acquisition would be considered.