Bango Regulatory News (BGO)

17 January 2013

Embargoed until 07:00

BANGO PLC

("Bango")

Market Update

Bango (AIM: BGO), the mobile payments and analytics company, today issues the following general update to the market, following the end of its nine month financial period ended 31 December 2012 (9m2012).

Highlights 

·; Rollout with Facebook across USA, UK, France and Germany

·; First Google Play operator billing live in December 2012 with Telstra in Australia

·; Powering Blackberry with 50 operators worldwide; BB10 launch due 30 January 2013

·; Microsoft's Windows Phone App Marketplace integration underway in initial countries

·; Analytics transaction volumes continued to grow at increasing rates

·; Signing of Global Framework Agreement with Telefonica Digital, announced today

Overview

Over the last two years Bango's market leading solution has become the platform of choice for some of the world's largest app stores, content providers and mobile brands. Bango has built direct billing connections into more than 90 global mobile operators and has signed billing partnerships with industry leaders including Facebook, Amazon, Microsoft, and MasterCard. Bango holds more than 200 million billable identities and has a total reach exceeding 1 billion mobile phone users.

Over the course of the period Bango continued to expand on its commercial relationships and extend its geographic reach - including into several emerging markets. Following the successful fundraising of £3m in May 2012, Bango executed on its plan to prepare for significant scaling-up in future transaction volumes; Bango made key hires to boost its executive team, invested in its datacentres and operational teams, and continued to innovate in its payment platform and analytics products.

Operational Progress

In the nine month period to 31 December 2012, Bango has demonstrated substantial progress with its commercial relationships. Bango in particular achieved significant progress with Mobile Network Operators (MNO) integrations,expanding Bango's reach into a subscriber base of more than 1 billion mobile phone users. Dozens of additional integrations are underway which are expected to add to this already substantial billing reach. The Board believes that it is important to note that,with many of the service roll-outs and launches underway, it is still too early to accurately forecast the level of business which will be generated.

Facebook

Bango provides Facebook with mobile web MNO billing, as part of an improved mobile payments flow, enabling Facebook's mobile web users to easily purchase digital content without using Premium SMS messages or being restricted by the limitations of credit cards. Instead, with Bango, users enjoy frictionless operator billing, paying on their phone, without the need to register personal details. Bango has been pleased with the progress with the relationship since it was initially announced in February 2012; the Facebook service was launched in the USA in June 2012, the UK in June 2012, Germany in September 2012 and France in November 2012.

Towards the end of the period, Facebook began offering a paid service called Promoted Posts. This allows Facebook users to 'push' a message posted on Facebook to a wider audience by paying a few dollars.

Google Play

In December 2012, Bango announced that its first Google Play™ operator billing integration had been launched with Telstra in Australia. Google Play delivers music, books, movies and apps straight to hundreds of millions of users around the world. Bango expects to deliver further operator connections into Google Play in the coming year, as Android™ continues to grow in the connected device market.

Blackberry

Live BlackBerry operator billing connections through Bango have now reached more than 50 operators worldwide. Blackberry announced that 30 January 2013 is the launch date for Blackberry 10 (BB10), a new smart phone and tablet platform that increases the number of apps available to BlackBerry users and also improves usability. The devices will be offered as full touchscreen handsets, or as keyboard plus touchscreen, maintaining the appeal of BlackBerrys for messaging. Bango has worked extensively with RIM during the period to prepare for the BB10 launch. Based on information from RIM management regarding the number of apps that will be available at launch, and improvements made to the app store user interface and the payment process itself, the Board expects the launch of BB10 to increase app sales.

Microsoft

Following the announcement of Bango's relationship with Microsoft in May 2012, Bango began integration of its platform with the Windows Phone Store. We are pleased to report that this process of integration is actively underway with mobile operator billing systems in three initial countries.

MasterCard PayPass Wallet

Also in May 2012, MasterCard announced its relationship with Bango as a technology partner to support its new PayPass digital wallet. In the same way as a wallet holding credit cards, Bango's technology can be used to access bank credentials or pre-paid funds, enabling quick and easy payment collection from users. Mobile wallets are not currently widely used, but Bango is well positioned for when they become more popular. Wallet providers that integrate with Bango can achieve more rapid deployment of their services to a wide range of Bango connected digital merchants. From the merchant's point of view, Bango significantly improves the user experience by presenting a wallet if the user has it, based on previous interactions or information from the wallet provider - or, otherwise promote an alternative payment method.

Bango Analytics

Bango's Analytics product continues to provide high value to our customers as well as prove highly synergistic with the Bango Payments platform. It is pleasing to see that growth in transaction volumes on the Analytics platform has continued at increasing rates, driven mainly by both mobile websites and downloaded applications.

Technology Progress

New releases of the Bango Payment flows technology and of Bango Analytics product were made during the period to deploy innovations and improve payment conversion rates and performance.

Following a review of future privacy and security requirements with our key customers and prospects, Bango developed and initiated a trial of new privacy technology that will enable Bango's customers to give people the ability to block access to the information collected about them by Bango.

During the final quarter, a major platform refresh was installed and put into production at Bango's primary datacentre. Comprising faster internet connectivity, a larger array of servers, enhanced security systems and additional storage this installation will enable Bango's core identity server to handle the significantly higher transaction volumes being anticipated by larger customers, whilst maintaining rapid response times, thereby continually providing excellent user experience in payment flows.

A strong theme for our newer customers is access to emerging markets where credit cards are less popular, and where Android and Blackberry devices have a higher market penetration than the iPhone. Mobile Operatiors in new emerging mobile markets such as Colombia, Indonesia, and Egypt were integrated during 9m2012. In addition, Bango is working with major customers to connect with leading operators in Brazil and India; these are more challenging commercially but management believes they present interesting opportunities.

Management Team Strengthened

During the period, Bango made several hires in order to strengthen its capability to consistently deliver the high levels of service expected by Bango customers and partners as the business continues to grow, transaction volumes increase and we continue to innovate products. It will also assist Bango to commercialize further opportunities that are arising.

Bango was delighted in November 2012 to appoint David Keeling to the senior management team as Chief Operating Officer (COO), following a thorough international search and selection process. David brings extensive international mobile and internet experience spanning 15 years and several continents to this newly created role

Also in November 2012, Gerry Tucker was warmly welcomed to the Board as Chief Financial Officer, at the same time Peter Saxton stepped down from the Board following eight years with Bango as Chief Financial Officer; his planned retirement was announced in May 2012. Gerry is an experienced finance leader and Chartered Accountant, with an extensive computer games industry background and public company experience.

Financial Update

It was announced in March 2012 that Bango had decided to align its fiscal year end to the calendar year. As a result, Bango will report on results for the nine-month trading period, from 1 April 2102 to 31 December 2012, on 19 March 2013.

Bango is pleased to report that the value and volume of end user payment transactions returned to growth towards the end of the 9m2012 period as a result of continued revenues from Blackberry App World and initial revenues from Facebook, Google and Opera. New smartphone business now accounts for more than 80% of end user spending. With the expectation that the featurephone business is reaching end-of-life with rapid growth of smartphone deployments, Bango has addressed and made provision for the structural issues around the phasing out of its legacy business during the period.

Significant one-time costs incurred in the period related to staff and recruitment, including the hiring of key personnel and costs incurred to buy out an extended notice period to accelerate the start date of a key hire.

Bango also invested approximately £1 million in a major hardware and software platform refresh in the primary datacentre to process significantly higher volumes of payment and analytics transactions, as detailed in the Technology Progress section.

Technology and personnel investments to support the continued growth of the business, in addition to some increased spend to prepare for the forthcoming release of BB10, have contributed to an expected loss for the period of around £2.4 million, of which approximately £1.3 million relates to one-off items.

Unaudited management accounts show that gross margin on end user spend has remained stable at around the 3.7% level, which is within Bango's longer term target range of between 2% and 5%.

Net cash at 31 December 2012 was £2.3 million (at 31 March 2012: £1.79 million).

Outlook

Bango is uniquely well-positioned in its market; it has made significant progress during the period with key commercial relationships, and has continued investment in personnel and infrastructure to fortify its foundations for future growth and increased transaction volumes.

Bango expects legacy featurephone transactions to continue to decline as a percentage of overall revenues and for the increase in end user revenues to be driven primarily by service roll-outs and launches with its industry leading customers. Bango sees significant opportunities for growth in emerging markets, and has recently completed joint visits with key customers to investigate opportunities in India, Latin America and China. Limited access to credit cards and bank accounts amplify the benefits of carrier-billing in such markets, and the deployment of smartphones has aided the rapid penetration of Android and other non-Apple operating systems.

Today Bango also announced the signing of a Global Framework Agreement with Telefonica Digital, pursuant to which the two companies will partner globally to create an enhanced direct-to-bill payment experience for mobile app stores. The partnership will combine Bango's frictionless payment technology and experience with Telefonica's BlueVia Payment APIs (Application Programming Interface), which will connect an additional 314 million chargeable customers worldwide through the Bango Payments platform.

Completed trials of direct-to-bill with Telefonica operating businesses have proven its ability to drive significant increases in sales. Where Bango has introduced operator billing to developed markets with high credit card penetration, Bango understands that its partners' sales of digital goods have been known to increase by 300% to 400%.

Ray Anderson, Chief Executive Officer of Bango, commented: "During the nine month period to 31 December 2012 Bango has made significant progress across its operations, and now has a total reach exceeding 1 billion mobile phone users. Bango has a unique proposition and is the platform of choice for some of the world's largest app stores, content providers and mobile brands such as Facebook, Amazon, Blackberry, Turner, Opera, Microsoft and MasterCard. We are delighted to have built such client momentum across our marketplace, and are pleased to see it continuing into 2013.

"At the beginning of 2012 we announced that our focus was on preparing for growth with key new payment customers such as Amazon and Facebook. Additionally, Bango Analytics transaction volumes have continued to grow, and Analytics is seeing interest from new customers, particularly those who want to understand web to App monetization. Following our successful fundraising in May 2012 we were pleased to be able to move quickly and decisively to upgrade our operational capabilities and demonstrate to our key Payment and Analytics customers and prospects that we have the foundations in place to deliver on their anticipated future transaction volumes.

"Bango sees significant opportunities for growth through the roll-out of services with our established partners, as well as in emerging markets, where limited access to credit cards and bank accounts alongside the penetration of non-Apple operating systems benefit carrier-billing. We therefore continue to view the future with confidence."

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About Bango

In the era of mobile technology, collecting payments has emerged as a central and complex challenge. Bango (AIM: BGO) powers payment and analytics on the mobile web, providing users with a massively smooth payment experience.

Bango's pervasive presence across the web creates a platform effect for partners, identifying hundreds of millions of users and maximising the number of single click payments. Customers who plug into Bango include Facebook, Blackberry App World, Windows Phone Store, Amazon and major mobile brands including CNN, Cartoon Network and EA Mobile. Visit: www.bango.com