In a trading update published ahead of full-year results expected in March, Bango, the London-listed provider of carrier billing services, reported a significant boost following the acquisition of DOCOMO Digital in August 2022. Despite profit margins coming under pressure as the loss-making business is integrated into the group, end user spend, a measure of payment volume, reached $5.6 billion, an increase of 37% compared to the previous year. Revenue grew 59% to $32.9 million.
DOCOMO adds significant scale to Bango, including 100 customers, $16 million in annual revenue, and an additional $3.5 billion in end user spend to process. The purchase price of just $4 million looks to be outstandingly good value.
Despite the strong top line, gross profit margins fell to 80% due to “increases in audience revenue and higher cost of sales at DOCOMO.” However, management is confident in a return to gross margins above 90% by 2024.
Adjusted EBITDA is expected to be “at least” $4.1 million in 2022. This is rather lower than the $6.1 million recorded in 2021 but management says the decline is “in line with expectations, including the initial negative contribution from DOCOMO Digital.” Bango is optimistic about turning DOCOMO’s finances around, stating that the acquisition will be earnings enhancing in 2023 and that migration of DOCOMO customers to Bango’s platform is already underway. Management reports that it has already delivered $11 million of the forecast $21 million cost synergies from the acquisition and is on track to achieve an additional $10 million in adjusted EBITDA from DOCOMO by 2024.
Bango’s sales engine looks in good shape. It attracted 44 new merchants in 2022, including blue-chip brands such as McAfee, HBO, and Duolingo. The company proudly says it has become the number one telco integration partner for both Amazon and Google. New telco operators in 2022 included T-Mobile, Televisa Univision, Liberty Global, and Japan’s NTT, the former owner of DOCOMO Digital and the world’s largest provider of direct carrier billing. The latter should be a key growth engine in the future.
CEO Paul Larby expressed confidence in the company’s future, stating, “We enter the year with a rich pipeline of opportunities that make me very confident this strong growth will continue in 2023 and beyond.“
[…] In its own trading update, Bango, a smaller carrier billing specialist also listed on the London market, reported payment volume up 39% to $5.6bn in 2022 and revenue up 59% to $32.9m. […]