Bango Regulatory News (BGO)

15 September 2015

BANGO PLC

("Bango")

Interim Results

Bango (AIM: BGO), the mobile payments company, today announces its unaudited Interim Results for the six months ended 30 June 2015.

1h2015 Financial highlights

· End user spend (EUS) increased 72% to £18.45m (1h2014: £10.74m)

· £41.6m EUS annualized run rate for June 2015, £54.8m EUS annualized run rate entering September 2015 (December 2014: £32.9m)

· Despite strengthening GBP, Bango remains on track to meet EUS growth expectations of at least 100% from December 2014 to December 2015

· Gross profit on EUS increased to £0.38m (1h2014: £0.28m), up 36% YoY

· Mix of business shifted towards agency model resulting in gross margin increase to 36% (1h2014: 24%) and EUS margin of 2.1% (1h2014: 2.6%) within target range of 2 to 5%

· Stable Adjusted LBITDA* -£1.82m (1h2014: -£1.85m)

· Opex stable at £2.43m (1h2014 £2.56m) demonstrating scalability of current platform and providing foundation for move to profitability

· Cash balance of £4.04m on 30 June 2015 (30 June 2014: £2.65m; 31 Dec 2014: £6.25m)

* Adjusted LBITDA is Operating Loss before depreciation, amortization and share based payments.

1h2015 Operational highlights

· Announced seven new Google Direct Carrier Billing (DCB) activations including powering Google's DCB entry into South America (announced March 2015) and into Africa (announced August 2015)

· Launched carrier billing routes for app store partners in several additional markets, including Spain, Indonesia and Mexico

· Deployed four new BlackBerry Messenger on Android routes and Samsung DCB deployments increased to six

· Bango Platform now provides 43% of all DCB activations by app stores (Source: Progressive Research Sep 2015)

· MNOs reporting substantial additional revenue growth from use of Bango technology - building referenceable proof of the power of the Bango platform

· Further growth of scheduled activation pipeline to more than 40 and qualified prospects to well over 100 to fuel further acceleration of growth rate in the year ahead

· Bango Grid technology to accelerate market research and activation process launched in March 2015 is already gaining very positive feedback and usage from major app stores

Ray Anderson, Chief Executive Officer of Bango, commented:

"Despite the unprecedented strengthening of sterling against almost all of the domestic currencies in countries where we are most active, and a declining market share of Blackberry devices, we have demonstrated an accelerating growth rate and remain on course to meet our 2015 exit run rate expectations.

The Bango cost base remains stable, but Bango technology and growing momentum has enabled increasing levels of engagement with more mobile operators, more App Store activations and has provided tools and technology that has enabled existing activations to grow their revenues quickly.

This progress demonstrates the benefits of the investments in the Bango technology and systems made in 2014, providing a strong foundation for Bango to expand on its position as the industry standard platform. This will benefit App Stores, mobile operators and consumers. It also provides some exciting opportunities for further value creation for Bango in the future."

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About Bango

Bango's mobile payment platform is vital to the global growth in digital content sales. The giants of mobile choose the Bango Payment Platform to provide a delightful and immediate payment experience that maximizes sales of digital content.

With over 140 markets activated by Bango partners, the Bango Payment Platform is established as the global standard for app stores to offer carrier billing. As the next billion consumers pick up their first smartphone, Bango technology will be there to unlock the universe of apps, video, games and other content that bring those smartphones to life. Global leaders plugging into Bango include Amazon (NASDAQ: AMZN), BlackBerry (NASDAQ: BBRY), Facebook (NASDAQ: FB), Google (NASDAQ: GOOG), Samsung (005930: Korea SE), Microsoft (NASDAQ: MSFT) and Mozilla. Visit: bango.com

CEO's statement

Bango has continued its strong progress as shown in these interim results. With the success of the Bango Payment Platform demonstrated by the accelerating growth in end user spend, focus in the first half has been on new activations, providing more opportunities for end user spend growth and building on the benefits of Bango emerging as the industry hub for app store Direct Carrier Billing (DCB).

Update on new activations

The power of the Bango proposition for Mobile Network Operators (MNO) was demonstrated in the first half by du - the MNO headquartered in Dubai, which was able to integrate with Bango and in turn activated five app stores within six months.

From the app store perspective Bango enabled Google Play to launch into South America for the first time - starting with Iusacell and Nextel in Mexico. Bango also enabled Google Play to deploy with DCB into Africa for the first time, starting with industry leader Telkom South Africa. In the year to date, Bango added seven new Google activations. The pipeline for further activations remains strong, with approximately 40 activations from a number of App Stores underway.

The relationship with Microsoft is developing well, with five new activations so far in 2015. Bango sees great opportunity in working with Microsoft to deploy DCB to enable users of Windows 10 on any device to pay for Microsoft services, such as Office365, Outlook, Minecraft and games across Windows and Xbox.

Amazon is also progressing its use of DCB with Bango, with a number of projects underway, and exciting developments expected 2016.

While market presence of BlackBerry devices is reducing, in March 2015, BlackBerry started deploying BlackBerry Messenger (BBM) across Android, Windows and iPhone devices using Bango technology to collect payments for valuable BBM based services. This service is now starting to generate small but incremental revenues, giving Bango useful exposure and experience in the area of payments associated with social networks.

Initiatives for active DCB routes

Throughout the first half of 2015, Bango has introduced new technology in the Bango Platform to enable MNOs and app stores to grow end user spend more quickly than otherwise possible. These include:

· Bango Boost - Unique, detailed post-launch analysis of transactions and aborted transactions that provides a clear understanding of subscriber purchase behavior. Bango Boost identifies revenue opportunities and recommends ways for an operator to drive revenue and improve customer experience

· Risk management - Bango can augment MNO billing systems with more flexible controls that enable mobile operators to determine optimal spend limits and controls to maximize spend without increasing risk

· Bango Care - An online tool that gives operators a quick and easy way to review customer transactions to enable more informed responses to their questions. Bango Care enables operators to set per-customer spend profiles, allowing the best subscribers to spend more while controlling new and higher risk customers

Prepared for high growth in transaction volumes

The current Bango Payment Platform and systems, deployed in two datacentres continue to reliably and securely process increasing levels of transactions. The Bango Payment Platform has been tested to handle around 15 times current levels using the current hardware, software and personnel.

Product development and the platform effect

Bango Grid is now in use with three major app stores and has been shown to a new major app store prospect. In addition to accelerating and streamlining the planning and activation of new MNO routes by Bango customers, the Bango Grid has two other potential benefits. First it will allow Bango to open up its platform at low cost to content and service providers that have less resources than the major app stores. Second, it will allow other payment methods to be rapidly made available alongside DCB to any or all Bango customers.

The strategic value of the Bango Payment Platform increases as more app stores and MNOs integrate with it. The platform provides a common point of integration between the wide range of MNO billing systems, alternative payment instruments (including credit cards, mobile wallets and tomorrow's emergent technologies) and the giant digital content merchants, mainly app stores. For each app store or MNO, Bango offers a highly efficient single route to reach multiple partners, without needing to build out integrations one-by-one.

Sales and Marketing Activity

The Bango team works in close collaboration with the business development teams of the world leading App Stores. It provides information and account management support to show the benefits of integrating with the Bango platform to provide their billing services for apps and content. As proof emerges of the speed and reliability of the Bango technology, and of the revenue growth opportunities that are possible using Bango, the sales process becomes increasingly straightforward.

The Bango Grid enables the opportunities available to Bango customers to be rapidly assessed, activations to be started and progressed, and revenues to be managed and boosted with substantially less human involvement than historic approaches.

These factors mean that cost of sales can remain low as the footprint expands, and that momentum will build in our customers and partners.

Outlook

Bango has made good progress in the first half of 2015 and remains on track to achieve a minimum of 100% increase in end user spend through the platform by the end of 2015, based on live activations at the end of 2014.

In addition to this growth from prior activations, Bango has launched 19 new direct carrier billing routes in the current financial year and has established a strong pipeline of further activation opportunities for the remainder of 2015. Bango has invested in establishing new relationships with Microsoft, Samsung and Amazon; and as billing activity increases with those and other potential new partners, Bango stands to benefit greatly.

With a stable cost-base and increasing end user spend, Bango firmly believes that it can become profitable and cash flow positive comfortably within the current capacity of the Bango Payment Platform.

Ray Anderson

Chief Executive Officer

CFO's statement

1h2015 Financial review

Results for the period do not include any material income from the agreements signed with Samsung, Amazon or Microsoft but do include costs relating to the establishment of these relationships.

End user spend

End user spend is the most significant Key Performance Indicator (KPI) for Bango. It shows how much business is being transacted through the Bango Payment Platform for the app stores. Growing end user spend and capturing market share is the cornerstone of Bango's business in this nascent and evolving industry.

In early 2015, Bango predicted that, based on end user spending trend data from 2014, end user spend from activations live in December 2014 would grow by at least 100% to over £65m ($100m) annualized run rate by December 2015. Bango is pleased to report that progress is on track to achieve this rate of growth, with revenue from these activations accelerating.

End user spend for the 6 months to 30 June 2015 was £18.45m, up 72% from 1h2014 spend of £10.74m.

Annualized end user spend for the first week of September was £54.8m, up from £41.6m in June 2015 and £32.9m in December 2014, demonstrating Bango's increasing pace of growth. Bango has invested in a platform to process end user spend at scale. The growth in end user spend is an indicator that Bango's strategy of connecting major app stores to Mobile Network Operators is working.

Bango Boost and Bango Care initiatives for active Direct Carrier Billing routes, launched in the first half are improving the growth rates of end user spend across a range of countries and app stores.

Margin on end user spend

Margin on end user spend was 2.1% (1h2014: 2.6%). This remains within the medium-term target range of 2-5% outlined in 2013.

Margin on end user spend is higher in markets where volumes are lower, or where Bango is used as a payment collection partner or to convert currencies. Margin is lower on routes where the volume grows - with a tiered transaction fee being offered in some cases. Bango believes that it has a highly competitive transaction fee that will not enable competitors to make pricing a significant reason to allow them to enter the market.

The last year has seen an unprecedented strengthening of the Pound Sterling (the Bango reporting currency) against most of the domestic currencies of the countries where Bango generates its end user spend. For example while sales in one region grew 107% in domestic currency, the growth was 74% measured in Pound Sterling. There is no risk to margin percentage from exchange rate swings, but there will be some impact up or down on reported numbers depending on the strength or weakness of the pound. Given the substantial growth expected ahead, the likely spread across many territories and the bulk of operating costs being in Sterling, Bango will continue to report in Pound Sterling and be transparent about exchange rate impacts.

Total turnover

Total turnover, as reported by Bango, is comprised of end user activity fees and platform services fees:

- End user activity fees are a blend of end user activity and agency fees related to processing payments transactions. When Bango is the principal, the gross end user spend, excluding sales taxes, is recorded as turnover. When Bango is not the principal, only agency fees are recorded as turnover

- Platform services fees are a blend of fees for integration to the Bango Payment Platform and development work for app stores

Total turnover for the period was £1.7m (1h2014: £3.0m). The decline in the turnover figure is due to a reduction in transactions where Bango is the principal typically at a 2-7% gross profit. This contrasts with the 107% end user spend growth from the agency portion of the business, which is 100% gross profit.

Gross profit

Gross profit from end user spend grew 36% driven by new activations in the period and continuing growth in spend from app stores launched in prior years. Gross profit in 1h2015 was £0.4m (1h2014: £0.3m) and we expect gross profit to continue to increase as end user spend grows in 2h2015 from billing routes already launched in 1h2015, as well as the strong pipeline of carrier billing launches.

Gross profit from other fees was £0.2m (1h2014: £0.4m) and reflects the move away from up-front activation fees to a monthly fee model as part of the Bango strategy to accelerate the increase in the number of Direct Carrier Billing activations.

Gross margin expressed as a percentage of turnover was 35.6% (1h2014: 23.5%).

Costs

The cost base of £2.43m for the first half of 2015 (1h2014: £2.56m) is stable. As Bango continues to make savings in operational costs by realizing efficiency gains, Bango has increased its investment in sales and marketing activity while maintaining a stable opex. Management remains confident that the Bango Payment Platform and cost base will support at least 15X current end user spend levels.

The total operating costs excluding depreciation, amortization and share based payment decreased by 5% to £2.4m (1h2014: £2.6m).

LBITDA, adjusted to account for share based payments for the period ended 30 June 2015, was steady as -£1.82m (1h2014: -£1.85m).

Depreciation and amortization for 1h2015 increased to £0.7m (1h2014: £0.6m) due to the increased number of research and development projects completed in FY2014. Share based payment charge remains broadly consistent at £0.2m (1h2014: £0.2m). The loss after tax was -£2.7m (1h2014: -£2.5m).

Loss per share

Loss per share 5.1p (1h2014: 5.5p).

Balance sheet

Cash balances stood at £4.04m (£2.65m on 30 June 2014).

Cash flow

Bango had a negative operating cash flow of -£1.72m (1h2014: -£1.72m) in the half year, but had a strong cash balance of £4.04m (1h2014: £2.65m).

Analysis of 1h2015 financials

1 End user activity fees are a blend of end user activity and agency fees related to processing payments transactions. When Bango is the principal or merchant of record, turnover is the gross end user spend excluding sales taxes. Where Bango is not the merchant of record then the turnover is recognized net and excluding sales taxes.

2 Platform services fees are a blend of analytics fees and fees for integration to the Bango Payment Platform

Gerry Tucker

Chief Financial Officer

Consolidated statement of comprehensive income

for the six months ended 30 June 2015

All of the activities of the group are classified as continuing.

Notes 1 to 8 are an integral part of the consolidated financial statements.

Consolidated balance sheet

for the six months ended 30 June 2015

Notes 1 to 8 are an integral part of the consolidated financial statements.

Consolidated cash flow Statement

for the six months ended 30 June 2015

Notes 1 to 8 are an integral part of the consolidated financial statements.

Consolidated statement of changes in equity

for the six months ended 30 June 2015

Notes 1 to 8 are an integral part of the consolidated financial statements.

Bango PLC ("Bango"), a United Kingdom resident, and its subsidiaries (together "the Group") provide services to facilitate activity in the mobile internet. Bango's shares are listed on AIM on the London Stock Exchange. The address of Bango's registered office and principal place of business is 5, Westbrook Centre, Milton Road, Cambridge CB4 1YG.

The interim financial statements have been approved for issue by the Board of Directors on 14 September 2015.

The condensed interim financial information for the half year ended 30 June 2015 has been prepared using the recognition and measurement principles of International Accounting Standards, International Financial Reporting Standards and Interpretations adopted for use in the European Union (collectively EU IFRS). They do not include all of the information required in the annual financial statements in accordance with IFRS, and should be read in conjunction consolidated financial statements of the Group for the year ended 31 December 2014.

The consolidated interim financial information has been prepared under the historical cost convention.

The cashflow forecasts of Bango anticipate increased cash generation from trading operations, therefore the Directors have a reasonable expectation that there are adequate resources to continue its operational existence for the foreseeable future. For this reason they continue to adopt the going concern basis in preparing the financial statements.

The principal accounting policies adopted are consistent with those of the annual financial statements for the year ended 31 December 2014.

The accounting policies have been applied consistently throughout the Group for the purposes of preparation of these condensed consolidated interim financial statements. 

(a) End user spend

Bango has identified end user spend a non IFRS alternative performance measure as its Key Performance Indicator on which all management decisions surrounding investment in the platform and development of intangible assets is based. Due to the complex contracts in place the turnover figure in the accounts is a mixture of gross transaction value where Bango is principal and margin only where Bango is the agent. This is to comply with relevant accounting rules, however, the key business decisions are based on the total value and volume of transactions that Bango has processed in each month through its payment platform. Therefore, to give additional information to key stakeholders of Bango's accounts, we have included this additional reporting in order to assist users of these financial statements.

(b) Turnover and gross profit

Bango, based on the information reviewed by the management team, has identified two operating segments. Management reporting is based principally on the type of customer and strategic decisions are made on the basis of the gross profit generated from each segment. The segments are not separately managed and therefore Bango's headquarters and its research and development activity are considered group operations and are not allocated to any operating segment. Segment information can be analyzed as follows for the reporting periods under review.

End user activity is the content access fees paid by end users for accessing chargeable content provided by digital merchants adjusted to take account of whether Bango is agent or principal in the transaction. Gross profit for this segment is after both digital merchants and payment provider charges. Assets for this segment are amounts due from payment providers. Liabilities for this segment are mainly fees payable to payment providers for provision of services and fees payable to digital merchants for provision of content sold by Bango to end users.

Platform fees are the amounts paid to Bango by digital merchants and others for package fees and other services including analytics and operator activations. Assets for this segment are amounts due for package fees and other services. Liabilities for this segment represent deferred income for package fees. Group assets include non-current assets and cash and cash equivalents. Group liabilities relate to administrative expenses.

c) The Group's turnover from external customers is divided into the following geographical areas:

Turnover is reported based on the location of the customers. Most non-current assets are based in the UK, except for £21,497 of property, plant and equipment held in the USA.

Basic loss per share is calculated by dividing the loss attributable to equity holders of Bango PLC by the weighted average of ordinary shares in issue during the period.

At 30 June 2015 options over 3,394,729 (30 June 2014 3,105,074) ordinary shares were outstanding. Given the loss for the year, these options are considered to be anti-dilutive. Such options could potentially dilute basic loss per share in the future.

During the period 140,680 share options over 140,680 ordinary shares were exercised at exercise prices ranging between 28.75 pence and 82.5 pence with a par value of 20 pence. The total proceeds were £67,486 of which £28,136 was recognized as share capital and £39,350 as share premium.

During the period 405,500 options were granted to employees, including 32,500 to Gerry Tucker, a director. Grants to employees who left in the period resulted in lapses of 308,875 options in the six months to June 2015.

At the end of the six month period ended 3,394,729 (30 June 2014: 3,105,074) share options were outstanding.

The condensed consolidated interim financial information was approved by The Board of Directors on 14 September 2015. They are unaudited but have been reviewed by the auditors and their report in included within this note.

The financial information set out in this interim report does not constitute statutory accounts as defined in section 435 of the Companies Act 2006. The figures for the period ended 31 December 2014 have been extracted from the Statutory Financial Statements of Bango PLC, which have been filed with the Registrar of Companies. The auditor's report on those financial statements is unqualified and did not contain a statement under section 498(2) or 498(3) of the Companies Act 2006. The interim financial information for the six months to 30 June 2015 is unaudited. The interim report together with an analysts briefing presentation will be distributed to all shareholders shortly and will be available on Bango's investor blog at www.bangoinvestor.com.

Independent review report to Bango PLC

Introduction

We have been engaged by Bango PLC to review the financial information in the half-yearly financial report for the six months ended 30 June 2015 which comprises the Consolidated Statement of Comprehensive Income, Consolidated Balance Sheet, Consolidated Cash Flow Statement, Consolidated Statement of Changes in Equity and the related notes (1 to 8). We have read the other information contained in the half yearly financial report which comprises only the financial, operational and post period highlights, CEO and CFO reports, and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to Bango PLC in accordance with guidance contained in ISRE (UK and Ireland) 2410, 'Review of Interim Financial Information performed by the Independent Auditor of the Entity'. Our review work has been undertaken so that we might state to Bango PLC those matters we are required to state to them in a review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than Bango PLC, for our review work, for this report, or for the conclusion we have formed.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The AIM rules of the London Stock Exchange require that the accounting policies and presentation applied to the financial information in the half-yearly financial report are consistent with those which will be adopted in the annual accounts having regard to the accounting standards applicable for such accounts.

As disclosed in Note 2, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The financial information in the half-yearly financial report has been prepared in accordance with the basis of preparation in Note 2.

Our responsibility

Our responsibility is to express to Bango PLC a conclusion on the financial information in the half-yearly financial report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the financial information in the half-yearly financial report for the six months ended 30 June 2015 is not prepared, in all material respects, in accordance with the basis of accounting described in Note 2.

GRANT THORNTON UK LLP

Chartered Accountants

Auditor

Cambridge

14 September 2015