Following on from a trading update in January, Bango released its preliminary numbers yesterday, which resulted in my once again catching up with management.
This time round, it was with both CEO Paul Larbey along with CFO Matt Garner, where I hoped to glean more on the forward outlook, following the surprising and untimely warning that was contained in the January release.
Before looking at the numbers and the expected growth acceleration, it is perhaps pivotal to focus on the cash position here and the concerns that a raise is arguably imminent in order to strengthen the balance sheet.
Although it is something I homed in on back in January with co-founder Anil Malhotra who scotched the notion, I thought it worth revisiting with CFO Garner.
Whilst the financial picture is somewhat opaque even to those that are well versed in the numbers game, Garner reiterated the view to that of Malhotra, adding that they wouldn’t have to embark on a placing.
Indeed, the CFO said that they feel they are in a good place now on the cash front where they have an as yet unused Barclays facility which is very much there as a buffer, but which might be tapped into at the end of the year.
That should provide for further reassurance for investors unnerved by the cash erosion and fears of further dilution at a discounted price.
In terms of the full year numbers delivered and which had been reduced in the January update, total revenue increased to $46.1m representing a 62% increase on the prior year, whilst ARR moved to $8.8m recording a 76% jump.
Those numbers aside, Bango nevertheless resided over a pre-tax loss which came in at $7.8m, considerably higher than the prior year, which understandably raises the question as to whether the current forecast for a 2024 pre-tax profit of $5.7m will be achieved.
On that front, it is worth recalling that the guidance for the current financial year (2024) had already been significantly reduced and where, looking at the level of growth feeding through, the current expectations arguably look conservative to this writer.
My gambit to the two execs that Bango should be under-promising and over-delivering was not intended to be an exercise in egg sucking and so it transpired where it was a theme that appeared to resonate.
CEO Larbey clearly outlined and emphasised on the numbers aspect, pointing to revenue in Q1 24 which grew by over 20% from Q1 2023 and the ongoing traction, leading him to concur with my own assessment on Singer’s 2024 forecast.
With a line seemingly drawn under the 2023 miss which was impacted by the complex issues within the Docomo acquisition, both Larbey and Garner reiterated confidence in the future growth path and prospects for significant cash generation ahead.
However, given the unexpected issues that arose around Docomo, I was keen to hear as to whether the situation has largely been put to bed.
The CFO said that they are almost two years into that acquisition now and that they had dug out a number of items, one of which, holding his own hand up, was missed.
Importantly, Docomo was acquired for just $4m and Garner was keen to emphasise that Bango should now enjoy notable cost savings at the back end of this year.
With the significant growth potential for the companies Digital Vending Machine (DVM) apparent as evidenced through its adoption by 3 of the top 5 US telcos along with a jump in new content providers which now total 93, then notable returns look well on track, if somewhat behind earlier forecasts.
Despite the unwanted news earlier in the year, Larbey said they had resided over significant progress with a core focus on capturing the subscription bundling opportunity through its DVM offering, which should provide for an extensive growth path with predictable and recurring revenues ahead.
The subscriptions space is arguably far more complex than at first glance though and is extending into ever new areas that reaches far beyond the more obvious space of movies and the like.
Global revenue from video, music and numerous other subscription-based services sold by Telcos are expected to surge from last year's $25bn to $43bn by 2027, which sees Bango in a potentially sweet spot given its established and growing relationship with major players.
One other aspect of the results announcement worth touching on was the revelation that the NewDeep joint venture with NHN has now been wound down, perhaps posing the question as to where that leaves the relationship between the two parties.
Larbey said that whilst the NewDeep venture started at the same time as NHN invested in Bango it is independent.
He went on to add that they appreciate NHN’s support as a long-term shareholder which has grown its holding and also supported Bango with a recent loan facility.
That suggests to me that the relationship remains very much intact and that NHN’s investment commitment to Bango appears unchanged.
With the CEO telling me that he sees significant acceleration ahead and given a heavy exposure to the US and a more positive environment for embracing businesses such as Bango, I asked him as to whether a dual or alternative listing may be considered.
Whilst acknowledging that it was something that had been discussed and citing there are potential benefits such a move could bring given the appetite for tech and growth companies over there, he countered by pointing out that the current market cap wouldn’t warrant such a move and that for now, the AIM was right for the business.
With the share price having taken such a hefty fall back in January, I also asked the question as to whether they were aware of a seller in the market. Larbey explained that they obviously receive notifications on the notable movements of stock, adding that they were aware of some new investors who have been purchasing and starting to come in.
No doubt the shareholder register will be updated in due course, which will arguably provide for some further visibility for the private investor as to who is on board.
Returning to the forecast numbers for the current full year, Broker Singer for now has $53.5m revenue pencilled in with adjusted pre-tax profit of $5.7m. That equates to adjusted EPS of 7.3c, although given what appears to be a low bar set, then upside risk could come to the fore.
Aside from Singer, Stifel had until recently also been on board as a joint broker, but due to the cost of retaining a second broker Bango decided to revert to just the one advisor.
On the share price front, the stock has now recovered from recent lows and Bango stands on a forward PER of circa 20, although any upgrade followed by deliverable 2025 numbers put into the market could provide for significant upside from the current levels.
Given the past volatility and twists and turns here though, investors can perhaps be forgiven for adopting an air of scepticism and the company really does now need to demonstrate on delivery.
That said, the story does appear intact and the prospects and deliverable numbers look potentially seriously exciting, which could provide for decent returns from the current level.
As for future news flow, Larbey said that they will continue to release on that front as and when they can with further light on the current year's progress delivered in the next trading update.