Bango PLC (BGO) Earnings Call Transcript

Good morning, ladies and gentlemen. Welcome to the Bango PLC investor presentation. [Operator Instructions] And before we begin, as usual, I would just like to submit the following poll. And if you'd give that your kind attention, I'm sure the company would be most grateful. And I would now like to hand over to the executive management team from Bango PLC, Paul. Good morning, sir.

Good morning, and thank you, everybody, for your time this morning. I'm joined here by Matt, our CFO; and then off camera you have Sukey, who heads up Investor Relations, who will help guide us through the Q&A. Just on that point, we've had quite a few submitted in advance. So thank you very much for that. Please do feel free to add any questions as we go through the presentation into the chat window. We might answer some of those as we go if not, Sukey will make sure that we cover as many as we have time for at the end. So without further ado, let's get started. Just by way of setting the bigger picture, our vision really here at Bango now is to be where people subscribe. We want to be the place where everybody comes to get control of their subscriptions and to give subscribers like ourselves more choice and more control over the subscriptions that we have and that we manage on a day-to-day basis. Our product for that is a digital vending machine. And the digital vending machine, as a reminder, sits at the heart of the subscription economy. We're a growing number of subscriptions. That as users, we have the complexity of managing and made it simple to manage by those being distributed to a channel and having a single place we can see and view and subscribe and manage all of those subscriptions in one place. That's the Bango Digital Vendor Machine, and that's why we're here. And our values that underpin us as a company are underneath that. Is there anybody any doubt about what we're here to do, we're here to win. And to that point [ to being ] thrive values actually stands for victorious. If we step back and look at the bigger picture of the subscription economy and see the different players that fit within it. As we said, we have content providers or people who have subscription services. They're looking to access new ways of distributing those subscriptions quite often through a channel. They're looking to reduce the churn on those subscriptions to capture new users and to reduce their marketing costs. And so distributing through a channel such as a telco is an ideal way of doing that. The telco market, some of their -- these third-party services along with their first-party data services. The churn, if you talk to any of the subscription providers, the churn of a subscription coming through a channel is much lower than people who just have a credit card on file. And it's a way of accessing new customers that maybe they didn't have access to before. On the telco side, the telco, this is a great way of the telco reducing churn and keeping that subscription base. They can always use it to protect the pricing and the core pricing of those broadband subscription services. It's a great way of finding new users and a great way of generating revenue. So it's really lots of value for the telco. As we touched a little bit on the previous slide, there's great value for the consumer as well in terms of giving more convenience, easier to find new services, easier to pause subscriptions, easier to cancel subscriptions, easier to take out new ones, easier to see how much you're spending. So the DVM sits at the heart of all these sort of 3 new core system players. And really, what you see is this is really a win-win-win solution where everybody in the ecosystem benefits from having subscription services distributed through the Bango DVM into a channel. It's better for the content provider, better for the telco, gives the consumer more control, more choice and more flexibility. And it's the Bango DVM that's really at the heart of that. At a very simplistic level, in the second half of the presentation, I'll go into a little bit more detail. But if you step back and look at what is the power of the Bango DVM? What is the unique value that the DVM provides? And that's this sort of this, in effect, network effect, this ability to connect multiple telcos to multiple content providers. If you're a telco, you can connect once into the DVM and you get access to all the different content providers. If you're a content provider, you connect once to the DVM and you get access to all the telcos. And that means we can launch services more quickly than anybody else. And you can see a few examples at the bottom with Optus. We launched NBA in less than 3 weeks. With Verizon, we brought 40 new services to market in 20 months and Disney with Liberty Global in Belgium launched in just 4 weeks. And those times are a step change from how it's been done previously. If you talked to any of the content providers who tried to do some integrations directly with telcos, it traditionally takes them between 6 and 9 months. So to be able to compress that interval down from many, many months to just a few weeks, gives everybody a massive time to marketing advantage. And if you're a telco and you're launching new services, you are trying to make your existing telco services more often, that time to market is a huge competitive advantage. So let's look at the highlights for 2023. And as we -- from a DVM perspective, 9 new DVM customers, taking the total now to 18, so we doubled the number of DVM customers in 2023. We're now used by 3 of the top 5 U.S. telcos, U.S. being one of the largest subscription markets in the world, especially for video on demand, but also other subscription services. 33 new content providers joined the digital vending machine now in excess of 90 different content providers. It's now moved way beyond just video, music and gaming, which has historically been the sort of the center point of subscription stage, there are all sorts of different services from social media with Snapchat+ to home delivery services to Walmart+, a real variety of different services now in the digital vending machine and even more merchants than ever before relying on the Bango Digital Vending Machine to help them distribute these services through a channel. We launched the DVM consumer interface in 2023. We expect that to be with first customers in 2024, and that really enables telcos to basically offer these services more quickly, bring them to market more quickly by offering a product that they can just put their own brand on, put their own color scheme on, figure how it looks and feels. It makes it a lot faster for them to lock the subscription marketplace and bring that to market. And as we said earlier, time to market is a big competitive advantage in the telco space. The other obviously big element in 2023 was the DOCOMO Digital acquisition. We completed the $21 million of synergies in the year. And there's further optimization so we'll see through in 2024, but that acquisition is now largely behind us. Matt will go into more detail on that as he goes through his presentation. We're not just here to build the business for 1 year. We are here to build a sustainable business in the long term and sustainability, and sustainability growth is very important to us. We won the King's Award for Enterprise for International Trade. Last year, we were very proud to be one of the first winners of the King's Awards, a record employee engagement score of 79%, which is way above the industry average, which given the fact that we're now twice the size we were a year before, is a real testament to the strong culture in Bango, and the focus that everybody has in being successful in making Bango the place where people subscribe. And some great things in there and some great learnings and great feedback from that survey that allows us to make Bango an even better company to work for. We continued our commitment to the carbon neutrality to be net zero by 2040, put some more rigor around that given the size of the company now with the -- after the acquisition, so adopted the science-based targets initiative and really sort of created in 2023, a baseline for our carbon emissions on a move-forward basis. Security remains critical when you're becoming such a critical component for some of the largest companies in the world, be that the subscription providers like Netflix and Amazon and Microsoft will be that some of the largest telcos in the world like Verizon and T-Mobile, security is very important. And so we maintained and extended our ISO 27001 security certificate last year. So it's not just about building a great set of results, and it's about building us results that are sustainable for the future. So with that, I'll turn it over to Matt, who will go through some of the financials in more detail.

Thank you, Paul, and welcome, everyone, to the financial review of 2023. I think the first element to do is to recognize the disappointment from the January trading update, which came from the [ $21 million ] $3 million of revenues that moved after the year, a $2 million of additional costs that relate to some of the DOCOMO acquired routes and the $1 million of the FX on the intercompany loans. I'll be addressing those as we go through the meeting. But what I'd also like to introduce also some new metrics that will help and also some better splits of our revenues, which should help improve visibility and understanding. So looking now, first of all, at the financial summaries and the key areas of results for 2023, a 62% increase in revenues, bolstered by increase in transactional revenues as we took a full year of the DOCOMO business going up 79%, but also within our new DVM revenue split a 76% increase in annual recurring revenue, predominantly coming from DVM and also a 29% increase in adjusted EBITDA, which ended up at $6.4 million, which is slightly ahead of the trading update and in relation to the recognition of the FX on the intercompany level. So looking at the revenue growth, we still achieved the 62% revenue despite the $3 million of revenue moving out into another year. We did that working in December right up until the end, signing contracts between Christmas and New Year. But unfortunately, some of those we weren't able to complete or recognized in that period. However, where we did improve, we had rapid growth in the transactional revenues, which went up to 79% from 2022. So these came from not just the organic area of using a full year of DOCOMO Digital from the acquisition, but also if we annualize that DOCOMO Digital revenues from 2022, you can see we also have an underlying 5% increase in this DCB payments business, where we also saw an awful lot of increase was in the DVM, which has been growing very quickly and revenue growth there, up 31% and an even stronger increase in our ARR growth, which is up 76%. So considering the ARR, the annual recurring revenue, you'll see here that the ARR growth came not only from the existing customers. So we saw that net retention of 137%, this is a new metric that we put in place that shows the increase of between the beginning and the end period of the same cohort of customers. So looking cohort of customers at the beginning of '22 where their revenue ended up at the end of 2023. We're not only seeing that, but also seeing an increase from new customers. We had 9 new DVM deals signed in 2023. And during the course of the first quarter of 2024, we also announced the top 5 U.S. telco, which going to add a minimum of $22 million ARR to this year. You also see from the graph on the right-hand side, the progression of that ARR, and we've put the March number at $11 million to show that increase is continuing within 2024. Looking to expenses for the year. Obviously, there was an increase in those expenses as we saw a full year of DOCOMO Digital being acquired. And as we took the $21 million of synergies, obviously, some of those costs continue through part of the year of 2023. So during 2024, we'd expect to see those ones decline and we'll continue to get some benefit within 2025 as we close down the platforms that were related to the DOCOMO revenues. Amortization, obviously, is another key increase, where we saw that going up 55% as some of the capitalized R&D that we've used to develop DVM start to become revenue-generating. We had some exceptional items as well coming from closed down of the discontinued business with DOCOMO Digital and write down of some development costs from the old DVM platform. In terms of EBITDA, H1 was obviously a negative EBITDA of $0.2 million. We moved to a $6.6 million EBITDA in H2, giving us an overall $6.4 million, as I said, up 29% on 2022. Trading update did include the effect of $1 million FX on intercompany loans. We discussed this, these loans are intercompany items that were set up by DOCOMO prior to our acquisition and our funding items with no fixed term end and after discussion with the auditors, we've agreed that they should be moved those -- FX elements should be moved to reserves out to the P&L. Going back to the synergies and the acquisition elements from DOCOMO Digital. You can see that we've achieved the $21 million of cost synergies at the end of the year. And at the same time, we expect that there'd be a few more of those ones as we move forward from the [ DVM ] platform discontinuation at the end of the year. We're also looking to reduce the number of legal entities, which should reduce admin costs, and there will be further business simplification. During the year -- right to the end of the year, there was the increased cost of sales from the document digital routes that were identified. This came very late in the day, and we picked that one up as soon as we could, the contract being signed right at the end of the year. We expect that cost to reduce in 2024 and then margins in 2025 to return to the 90-plus percent that we've enjoyed previously. Another new split that we're giving, which hopefully will get some insight into some of the investment in CapEx that Bango does, obviously, this is all down in line with IAS 38, so we're following all of the correct procedures. But here, we're giving a split down between where the investment comes in relation to the migration, [ DVM ] development and also the platform development. You can see the plan is for 2024 for that R&D capitalization to reduce as obviously the migration work that we've been undertaking during '22 and '23 ceases. But there's continued investment, obviously, in DVM and the payments business is the main platform business in there. We also take advantage as part of our R&D of the tax benefit that's offered by HMRC. We're conscious that, that one changes its application as of 2024. But within that period, we should see a good receipt again from the 2023 investment. Looking at cash movement. You see, obviously, one of our main uses of cash is in the investment in R&D, which we referred to previously. You also see that we took -- we had some reduction in our working capital with working capital movement, negative $3.1 billion, but still good generation from cash from operating activities. We took the loan from NHN, one of our key investors during the course of the year and the half year at $7.9 million, which was lower than the indicated $10 million that we noted during the -- at the time of the acquisition. We've been doing our financial forecast for the year for 2024, and we're in a good position to continue to fund our R&D for that period and also our operating costs. And to make sure that we have some form of buffer, we've also agreed with a GBP 3 million in overdraft facility with our bank, which is undrawn at the end of the year. Quick run-through from the income statement just showing comparatives back to 2018. One of the key areas I think to pick up on here is the associate loss, which you'll see increased during the course of this year. This was partly the operating loss that's fairly normal from previous years, but we also impaired that business as the decision was made to wind that business down during the course of '24, so we impaired in 2023. So final summary of the financial elements for this year -- strong revenue growth. We have payments business, which is continuing to grow. The DVM business is rapidly accelerating, and the ARR is giving a predictable revenue growth streams. On our costs, we expect to see the R&D CapEx cost decreasing during 2024, although we continue to invest in DVM. The cost synergies will become more apparent as we get full year advantage of those $21 million in costs. And the payments business will further reduce the costs in 2024 and beyond. We do have sufficient cash to fund the operations and the R&D CapEx that we anticipate to do during 2024. We have an overdraft in place to give us that buffer. And the -- to remind people in those plans as well, we're looking to pay off $2 million of the loan to NHN during the course of this year starting in September and a payment at the end of the year. All of this is covered. So passing back to Paul.

Thanks, Matt. So in this final section, I want to spend a little bit of time and talking about the market opportunity and to give some of the market factors we see and also talk a little bit about how we're taking that market input and what it means in terms of DVM from an investment and a future perspective. If we step back and look at the market, I think there's no doubt that the subscription economy is growing. We probably all feel this as individuals. The number of services we pay for by subscriptions is larger than ever, expected to exceed $600 billion in just a few years' time. So a very fast-growing subscription economy. And already, a big portion of that is delivered through channels and then in particular, telcos. And telcos historically have always been a place to go through for entertainment services. So those entertainment services went over the top and services like Netflix and Disney and Now TV came out, telcos remain the natural place for you to go to, to get access to those services. And even today, the 17% of those video services are delivered or bundle through a telco and that's only set to increase. And then you look at the other entertainment services. And today, there's over $25 billion worth of entertainment subscriptions alone being delivered through a telco. And as more and more different subscription services come in, I talked about the sort of the Walmart+ and the home delivery services later. Really, the market opportunity for us is that 600 billion subscriptions. And what portion of that will be delivered through a telco and their estimates of range anywhere from 25% to 50%. So somewhere between 150 million and 300 billion of subscriptions will be delivered through telcos. And that's exactly where Bango and the digital vending sits is at the intersection of that big revision economy that's growing and being increasingly delivered through a channel. So why telcos? And I've included here a few clips that you may or may not have seen in the news if you've been following some of the big telcos in particular, the large European telco CEOs on multiple locations, the most recent being back at Mobile Congress in Barcelona in February this year. I've been talking about -- and I'm talking about Orange, Deutsche Telekom and Telefonica and Vodafone have been talking about the challenges they face in building networks and investing in networks to carry all this traffic that is coming to them from over the top. Most of that from companies like Netflix and Amazon and sort of Microsoft. And so they've been campaigning with EU for some time now to how -- can they charge for that particular traffic? Can they charge for carrying that traffic? Or the EU, let them merge and combine together so they can save CapEx and then sort of build that networks together and share networks. And obviously, in the U.K., discussions ongoing between Vodafone and 3 at the moment. So that's been the message from a lot of the European large telco players and was certainly evident back in mobile [indiscernible] in February this year. But we think there's another alternative. And then this other alternative's would be increasingly adopted and that's to monetize those that traffic that you're carrying anyway in a different way by entering the value chain. And how you do that you monetize your non-network assets, your customer relationship, your billing relationship, your ability to market to customers by bundling and selling these third-party subscriptions because you're carrying the traffic over your network. So why not play in the value chain and extend your -- and protect your core network services by playing in the value chain and selling these subscription services to your customer because we know there's a consumer demand for it. We know that we have too many subscriptions. We know that they're complex to manage. We know from all the surveys we've done that people want to see them in all places. So there's a great opportunity to monetize non-network assets, change your position in the value chain. And as you can see here, it's exactly what Verizon has been doing. And you see the comment here a lot from the Verizon CEO and how this bundling reduced their churn by 60% to 70%. I mean, telco while, if you -- any business case that reduces churn by that level of magnitude, the business case is very, very positive. So that's why increasingly telcos are looking at bundling and super bundling to really be the sort of a catalyst for them in terms of changing their position in the value chain and helping them monetize the assets they're investing in, in a slightly different way. And as Verizon CEO said, it's also great for the content providers. Well -- and as we've seen in 2020 last year, you see an increasing number of content providers going to the Bango DVM and relying on the Bango DVM to find new customers. It's now [ not ] just about the moves in the TV, although that still remains the dominant and then those are the services that always get the headlines. It's gone beyond music and audio, it's gone beyond some of the gaming services like Xbox. We added NVIDIA last year. It's gone to more of the lifestyle services, sporting and health services, security products, productivity products, reading, different types of e-reader services from everything from [ LEGO ] sort of educational services through to different types of services to education. And food and recipes and home delivery, more and more services now being delivered by subscriptions. And we've really got that point now where we have sort of critical mass. I mentioned Mobile World Congress earlier. If I go back to the Mobile World Congress only back in 2023, we presented the Digital Vending Machine and a lot of the questions from operators and merchants are about, what's the business model, how does it work? When you say super bundling, what do you mean? Only a few months ago, and so just one year after that, this year, the discussions have changed. It's now all about, how can we launch, how quickly can we launch? How can we do it faster? And so that's really -- the messages out there and more and more operators are now coming up and approaching us, sometimes cold, we're in a strong position. We have connectivity with most of the operators. We've had a whole host of new customers come up to us even at the trade shows and say, look, I want to do bundling. I've spoken to 3 different merchants and they all tell me to talk to you. And that's really where we've got to now is that the power of Bango being associated with the bundling of subscriptions is a very strong message and that makes us available to sort of convert and to drive this momentum forward even faster. We have merchants recommending telcos to Bango. We have telcos, recommending merchants to Bango. And then in terms of super bundling, which is a phrase we coined and defined only a few years ago, is now widely used across the industry by tech journalists, by analysts, use the term super bundling if it's always something that's existed. And it's a phrase we adopted to describe the subscription marketplace. We not just have them 1 the 2 services, but tens of different services together. And it's become an industry standard term. That's exactly what we're trying to do with Bango is make the Digital Vending Machine the industry standard for the distribution of these subscriptions through a channel. And they have -- that's what the Bango Digital Vending Machine is. It's about the speed to market, it's able to get -- as your telco access to the [ grid ], the world's greatest content providers, be able to put all those in one places in a compelling offer and deliver that speed and scale. There's much more to it than that. And I sort of talked about the speed and scale pieces earlier, but the value goes way beyond that. And for us, there are 3 key elements that drive our investment in the Digital Vending Machines. It's about helping content providers being even more successful. How do we make sure even more of those subscriptions go all the way through the sign-up place and how do they get more and attract more customers? How do the telcos launch even more quickly? How do you get the even more services even faster than they can already? And how do you give the consumer more control over the experience and a better overall experience in terms of how they manage all these variety of different subscription services that we all have today. As a technology company, it's innovation in these 3 areas that will keep us on the forefront and keep us ahead of all of our competitors in this market space. So now [indiscernible] management is sort of a big envelope of features that we've sort of talked about a little bit about in the past, but just simply the ability to be able to -- if you're a marketing team and an operator to be able to drag-and-drop subscription services together to be able to create those in a drag-and-drop environment to be able to test marking bundles by connecting 2 different subscriptions together. All doing in that in an easily configurable way is really, really important. It allows us to launch these subscriptions faster. It allows operators to try new things. And it gives -- it means we collect even more and more data about what subscriptions that have been happening, what bundles are working, what's not working so that we can drive the entire industry faster. That's the advantage that we see sitting at the heart of this ecosystem is we see data from across all these different services. And once you've created those products, you have to create the offer, is it going to be discounted for a period of time? Is it going to be free for a period of time? And as with any operator, there's sort of approval chain around that. So again, automating that, so you can more quickly and easily try and discounting more, try new bundles and be able to not only put that in place, get approval for it and how it published in the Digital Vending Machine automatically through a workflow is a really, really important part of ongoing sort of product investment, which as we sort of get -- collect even more data allows us to generate even more recommendations. So we're taking any guesswork that the marketing teams and the operators have because we have that volume of data, and we know what works and we know what the right subscription bundles are. The user interface is an important part. We've launched user interface in 2023. We'll expect that to see commercial with customers in 2024. And really, we did it to create this sort of prebuilt product that the operator can more quickly take to market because we were finding that we signed the contract that there was a large gap while the operator built this user interface and created their skin traded and put all the products in it and all pulling data from the Bango Digital Vending Machine, but it was a lot of work to build this consumer interface. So we decided actually one of a great opportunity for us is to build that ourselves, allow the operators to brand it. So it's purely a branding exercise, the actual mechanics of the consumer interface are there. And one of the advantages to us that, it allowed us to capture even more consumer data. We now just don't see what consumers have actually subscribed to. We see what they looked at, how they explored it, how they navigated the user interface. And again, there's massive power in that data, the allow us to even build an even better product and differentiate ourselves even more moving forward. To wrap up, let's look at the growth drivers. There are 4 key growth drivers for us moving forward. It's launching the DVM contracts we won in '23, those 9 new contracts getting those live so they can start generating revenue. Growing the existing customers being able to generate more success for those customers, so they start to climb up through the license tiers. It's about winning new DVM deals. And it's about exploring other verticals like side of telco where super bundling can really offer value to customers. If you've seen in the RNS that we issued this morning, we gave a sort of a Q1 update on all of these. In terms of launching back in March, we issued the RNS when the third Tier 1 U.S. telco launch that generated an additional $2 million ARR. We now have 3 of the top 5 telcos and ARR went from $8.8 million at the end of the year to sort of $10.8 million in March. We exited the quarter with that 11 -- that's partially due to not just launches of existing customers, but growth on existing customers. Matt talked about the net retention figure earlier. So you can see existing customers has started to grow. And that will really be the sort of second phase of the growth in '24 and 2025, as those large telcos climb beyond the initial tier into the second, third and fourth tier. New DVM wins, we signed 4 DVM deals in Q1. And given that we're always sort of -- lots of deals get wrapped up in Q4, we saw that last year. Actually, we signed the 9 deals we signed in the year 5, were in December alone. So Q4 was a busy time because telcos have a budget years and individuals have objectives that we try to wrap up in a calendar year. So Q4, so things get wrapped up in Q4. But the fact that we signed 4 in Q1 is testament to the other thing we should talk about in the trading note, which was the strength of the sales funnel. The sales funnel 7x larger than it was a year ago, but not just larger with deals more advanced. And you see that by the fact that 4 of those dropped out in Q1. And then in terms of other verticals, our first financial services win in Q1 '24, again, helping a financial services company, put subscriptions as part of their product offering. We still -- we really believe that telco will be the largest bundling channel. But clearly, there are other channels where exactly the same technology works as we are to capture those as we can with that technology. Overall, I think a really solid set of results in 2024, works in 2023, a great start to '24, and we're certainly excited about the future. So that's probably a good point, I think, to maybe dive into some Q&A. So I'll -- let's dive into the Q&A.

[Operator Instructions] But just while the company takes a few moments to review those questions that were submitted already, I would like to remind you that a recording of this presentation, along with a copy of the slides and the published Q&A can be accessed via your investor dashboard. Sukey, we obviously received a number of pre-submitted questions ahead of today's event. And as you can see there in the Q&A tab as well, we received a number of questions throughout your presentation this morning. So firstly, thank you to all of those on the call for taking the time to submit their questions. And Sukey, at this point, if I may now hand over to you just to chair the Q&A with the team, and then I'll pick up from you at the end.

Thank you to everyone who submitted questions in advance. I'll make a start on these while listeners on the call can also add questions in the chat window. So there's quite a few questions that they fall into a few general areas. So I'll group them together into themes. One for you to start with, Matt. There are a number of questions on the FX related to the intercompany loan. Questions range from why didn't you hedge currency to what will the impact be moving forward? Can you add some clarity here for people?

Sure. First of all, it's important to highlight that these are intercompany loans, which -- where the FX impacts are noncash impacting. These were set up predominantly with the DOCOMO companies, and DOCOMO chose to do investments by way of loans rather than an equity investment. And that means that there's no end date to these loans. So traditionally, hedging looks to a maturity date and you fix hedging against an end date when the repayment comes into place. So obviously, that's not an applicable sensible route for the FX that we have here. What we are doing is working with our tax advisers to find a note to tax-efficient way of reducing these items. Some of them may be converted into equity. We may choose to deal with them in a different way. But during that time, obviously, as they are investments effectively and the treatment that we've agreed with the auditors after the end of the year was that, that would fall into reserves movement. So that's the element on those ones. So what we're doing is we're looking to convert those at the best way and resolve those in the best and most tax-efficient way. That's happening during the course of '24. We've already started those discussions. And hopefully, that answers the question in relation to the hedging as well.

Thanks, Matt. One for you, Paul. There are a number of questions on EUS and why this isn't reported as a KPI anymore?

Yes. Good question. So we stopped reporting -- end user spend actually came in an audited KPI quite a few years ago. And actually, -- we last reported, I think, at the full year results in 2022. And at the time, at the end of results this year, we said the reason we don't think that's some valid metrics going forward is because with the switch to Digital Vending Machine and that being an increasing portion of the business, that link between end user spend and revenue actually is sort of broken. In the payments business, where we're taking a percentage of every end user spend, and that's our sort of fee for process in that transaction, then clearly, there's quite a tight correlation. But in the Digital Vending Machine model where operators buy tiers of subscriptions and that linkage between the 2 is broken. At a very simplistic level, when a license starts, there will be zero end-user spend, but there will be revenue. So for that reason, it became sort of a KPI that we didn't think was a good indication of the business moving forward. And so we stopped reporting as we explained back in 2020, I mean the results for 2022.

As a follow-up to that, Paul, there's a question about previous statements on U.S. growth being about 30%. Now we talk about mid-single digits. Can you help investors to understand that?

Yes. And there's sort of 2 different measures. When we talk about the sort of the high growth in spend, a lot of that is coming through subscription services through the Digital Vending Machine. So whatever the end user spend is in the platform, that's not the -- as I said, not a measure we track anymore. It's growing at a very fast rate. That mid-single digits is based on the revenue growth from that payments business. So that large payments business that we have, that we now sort of split out, we see that in the numbers that Matt presented earlier, really bolstered by the DOCOMO Digital acquisition that took us forward a couple of years in terms of the growth for that business. Really, we'll continue to grow overall at sort of mid-single digits depending on different launches in different app stores, FX, a variety, but it's a growing business for us that generates an increasing amount of cash because the investments as you see from the CapEx breakdown in Matt slides, is really focused on the Digital Vending Machine not on the payments business.

Okay. And switching topics now. Back to you, Matt. There are a number of questions about the timing of the January trading update and why it wasn't issued earlier?

Obviously, it's down to those 3 key issues that I brought up during the course of the presentation. So the FX impact, which obviously only materializes when we do the revaluation at the end of the period. And then that subsequent discussion with the auditors on treatment. So that wasn't completed before we updated the trading update, but was completed during the course of the audit. The additional costs from -- that happened within cost of sales, this really was again, a supplier, as I said, a supplier -- had some associated costs in relation to some of the DOCOMO acquired routes which really didn't crystallize until right at the end of December when the contract was signed. And then we had to look at the treatment of those costs as well to see whether they should be exceptional costs or whether they were just normal trading costs. But again, as we spoke about those once, they're reducing within '24 and in 2025, we expect to see those margins going back up to the 90-plus percent that we had before. And the final one was in relation to those revenues, the $3 million of revenues. These were, as Paul spoke about when he was talking about some of the contracts that were signed during the course of the year, we were working well into December on contracts that we had in the pipeline. Some of those just didn't complete and moved into -- moved out of the year and some of them we were looking at the recognition element of when they could be recognized under IFRS 15 and making sure we were accounting for the property. So those items just meant that we were slightly delayed in our release. But a lot of those -- all 3 of those items, you can see really didn't happen right until the end of December. We then obviously assured that there was the right treatment and then updated as quickly as we could after that.

And related to the trading update, we've had a couple of questions on the share price reaction and around share options. Paul, can you comment on this?

Yes. Sure. So I mean a drop in share price, given that basically the profitability is not unexpected. I think what was a surprise was the level of the drop. And as I said at the time, in our view, it was -- it really matched what was a solid year. We grew revenue by 62%. EBITDA grew by 29%. The Digital Vending Machine that key growth item for the business, ARR grew by 76%. We've delivered another 25% growth on top of that in early quarter of this year. So it was really the foundations of the business were really, really strong. Just as Matt said, a few of those events conspired at the end of the year to basically sort of meant that we sort of missed that level of expectation. And I think that in some ways, the size of the drop was even more disappointing because we thought it already came from a low level. We never felt the acquisition was fully priced in. We're really focused on the things that we control. We're focused on growing a great business, I mean, and focusing on the Digital Vending Machine and the opportunity that provides us, while in parallel, we have this payment business, which grows at mid-single digits, that generates lots of cash from the business that allow us to sort of repay the NHN loan, but more importantly, invest in the Digital Vendor Machine moving forward. Share options is something we're very focused here at Bango and we saw our employee engagement score a little bit earlier before. [indiscernible] everybody in the company gets options twice a year just after we issue results. Options are a big motivator for the Bango team and we want everybody in Bango to be -- act as a shareholder of the business and help drive that growth forward. And you see that in our employee engagement results and you see that in the energy and the teams and the innovation that the team is creating in driving the business forward.

Thanks, Paul. A couple of questions on Bango audiences and purchase behavior targeting. What are the prospects for that business moving forward?

Yes. So I almost believe there's huge potential in purchase behavior targeting and be able to use the data that we have to help people find new services and find new paying customers for subscription services as well as for other services. And we sort of -- we productized that through Bango Audiences, which was our way of doing -- taking this purchase behavior targeting technology as we call it and making that available to app developers to help them find the next paying customers. And we were very successful in that for a few years, some big app developers that sort of got some great results. And the potential was clearly there. But I think what was clear to those is that the potential in the Digital Vending Machine with the switch to subscription economy was absolutely just -- was really there and it was live and it was real now. As a company, we want to make sure we focus, we want to put our efforts behind a single project. That's the Digital Vending Machine. And so we took the decision to take the audience team and the technology and fall that into the Digital Vending Machine. And that's already starting to result in something in discussions we're having with merchants because actually many of those app developers that we -- customers are buying audiences, and now launching subscription services for their games and their different apps. So it makes sense to bring the 2 together. And really, it's all about focus and making sure we can drive the business forward.

A question now on our position in Japan and the opportunity there. Matt, do you want to take that one?