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My take on the results includes the following:
The Digital Vending Machine is the basis of the most profitable part of Bango. It is way ahead of the competition.
There is a great deal of potential demand for the DVD as the benefits for the Telcos are huge.
While there are very good reasons to adopt the DVD there are reasons not to do so.
One of the major barriers is the problem of interfacing the Telco's software with Bango's. If either party changes their software the interface may require revision. Bango has been working on simplifying the interface and this will be released in 2024.
Bango has transferred software developers at scale and these are working on major reductions to the reasons not to adopt the DVM.
Towards the end of 2024 it is reasonable to expect a significant increase in the number of sales of the DVM.
More information
https://www.youtube.com/watch?v=FtNIpUdlOIM
Https://bango.com/bango-expands-the-digital-vending-machine-with-new-streaming-subscription-services/
I doubt whether these will make much of a contribution in the short term.
Https://bango.com/bango-and-sam-media-power-xr-subscription-bundles/
Over the years I have encountered a number of instances of the stock market apparently being irrational. If one compares the numbers for Bango in 2017 to today, sales have increased by a factor 10 and the company is now making decent profits compared with losses. In spite of this the share price is less than half of what it was in 2017. The level of sales and profit for Bango is very difficult to forecast. What is certain is the numbers are improving rapidly. Had the forecasts been lower so that they were met then I would expect the share price would now be more than double what it is now.
Iwant,
With many of the contracts there will be an integration element before the product goes live. The integration costs may be partially funded and the funding can be invoiced when milestones are achieved. Without invoicing no revenue will normally appear in the accounts but the costs will.
If a liability arises, for instance if there is a very large loan say in Swiss Francs, then it would be normal to provide in the accounts if the exchange rate had gone against the company. The provision would not alter the cash but would alter the profits in say 2023. The cash outflow would appear in 2024 when the loan is settled.
Docomo had a number of loss-making contracts which Bango said they were going to terminate. This is easier said than done and I suspect there are still some which are live. Again, these should have been provided for prior to 2024 but the cash will be impacted in 2024. I suspect there are very few of these contracts.
Revenue is generally taken at the time of invoicing rather than when cash is received. I suspect that some of the newer large contracts have extended payment terms.
The narrative that seems to be doing the rounds is that sales will increase in FY 2024 and costs will increase at a greater rate. The majority of Bango's costs are employee related and they do not seem to have been recruiting since they acquired the staff from Docomo. Some of the extra staff will have been gainfully employed and some 'let go'. I suspect that they had staff in excess of their requirement for a while but they held on to these to save recruitment costs at a later date. Can anyone enlighten me as to where the additional costs are going to arise ?
Sales in FY 2023 are $46.1 M, they were $28.5 M in FY 2022 and $20.7 M in FY 2021. I cannot see sales in FY 2024 being less than $46.1 M and with few of the Docomo costs in FY 2024 there should be decent profits next year.
This is not the message that a company puts out when it is about to give the market a nasty surprise. It is in fact quite the opposite.
Https://bango.com/if-2023-was-the-year-super-bundling-took-off-2024-will-go-stratospheric/
Thank you Qd22 for your kind words. I expect the company to deliver the market consensus figures they have published on their website. If the numbers are going to be materially different they would have been obliged to inform the market. So we are in for a Happy New Year !
I thought the Write up very good. My particular interest is in 1. the 2023 year outcome and 2. what to expect for 2024.
1. We have been told several times, the revenue for both Bango and Docomo for the year is split 40/60 with 40% of the revenue earned in the first half of the year. The reported revenue for the first half year is $20 million. On the split 40/60 the second half would be $30 million and so the total for the year should be $50 million. Docomo brought relationships with additional telcos to Bango, such as America Movil. They also brought additional merchants to Bango such as Shopify. There were similarly benefits that Bango has brought to what was the Docomo business. I shall be disappointed if the broker projections of less than $50 million are not exceeded by a country mile.
2. When it comes to 2024, there has been a lot of uncertainty and this has resulted in conservative sales projections. The June 2022 a deal was announced with a ‘Global Tech Leader’ assumed to be Apple. It is supposed to start delivering sales in 2024. Bango is very restricted in what they can reveal about this deal. After the announcement Bango started to recruit developers at a rapid rate. If you look at the intangibles in the accounts you will see that Intangible assets have gone up to $33 Million in June compared with $27 million at the 2022 year-end. This increase is probably all development costs which Bango would not be allowed to capitalize if there were not related future profitable sales. There are also negotiations underway which will lead to more ARR as more companies licence the DVM software.
Bango has many employees working from home. During the pandemic Bango moved to larger premises and I understand they are looking to move again to even larger premises. There are a number of employees working at the telcos sites e,g, Verizon. The 21m$ savings are annual so about half this will be seen in H2.
There were three main costs relating to Docomo. First of all the costs of running the Docomo platform. Bango migrated the processing from the Docomo platform to the Bango platform last year and recorded the cost of about ten million dollars as an exceptional item in 2022. The next big cost was the termination of leases on Docomo offices. This was achieved in the first six month of 2023 and it would seem has not been treated as an exceptional item. The next large cost is the cost of 231 additional staff. These are being used to support sales and so should largely appear in the cost of sales. Sales should increase as a result of the extra staff which is what happened.
The integration progress was projected to result in 21 million dollars of annual savings. At the half year Bango claimed to have achieved 19 million of this. The second half will reflect the savings and in 2024 the EBITDA is projected to increase by 10 million dollars. (see page 17 of the 2022 Bango Annual Report.)
I doubt there will be any Docomo costs in 2024 just benefits.
The almost doubling of wages and salaries in 2022 is in small part due to Docomo. Docomo digital became part of Bango at the end of August so only four months and a day of Docomo wages are included. I was told by Bango that they had increased their headcount by about 60% prior to the acquisition. Bango moved to larger premises about 18 months ago.
The big growth area for Bango is bundling. Docomo was mainly involved in DCB rather than Software as a Service.
When Singer published their latest forecast for Bango they stated they had not updated the 2024 revenue figures. Bango almost certainly is involved with Apple. They are very restricted in what they can reveal about this so the forecast figures for 2024 have not been updated.
According to the 2022 accounts the wages and Salaries in 2022 were 17,348,000 Dollars compared with the 2021 figure of 8,874,000 dollars. This does not indicate a stable cost base.
According to the July update 'Bango generated strong growth during the first half of FY23 with revenue up 88% to $20.3M (1H22 $10.8M)' . To me an 88% growth is quite significant and given the more than doubling of headcount I would expect high levels of growth to continue.
My reading of the situation is that before the Docomo takeover Bango was increasing their headcount significantly. The Docomo takeover resulted in Bango increasing its headcount cheaply and at a much greater rate. They now have more than double the headcount they had a year ago. They have plenty of product to sell including to lots of new geographies. The extra money will enable them to put their additional staff to good use more quickly than would otherwise be the case. 2024 should be a very good year for Bango.