Full Year 2023 Bango PLC Earnings Call

Participants

Paul Larbey; Chief Executive Officer, Executive Director; Bango PLC

Matthew Garner; Chief Financial Officer, Executive Director; Bango PLC

Sukey Miller; VP Marketing; Bango PLC

Presentation

Operator

Good morning, ladies and gentlemen. Welcome to the Bango PLC investor presentation. Throughout this recorded presentation investors will be in listen only mode. (Operator Instructions)
And I would now like to hand you over to the Executive Management team from Bango PLC, Paul. Good morning, sir.

Paul Larbey

Good morning, and thank you, everybody, for your time this morning. I'm joined here by Matt, our CFO and then off camera is 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 in the chat window, we might answer some of those as we go, and so to 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. I've been here at Bango to be where people subscribe, we want to be the place where everybody comes to get control of the subscriptions and to give subscribers like ourselves more choice and more control of the subscriptions that we have and that we manage on a day-to-day basis.
Our product for that is the digital vending machine and digital vending machine is a reminder sits at the heart of the subscription economy. Where we have a growing number of subscriptions that is used as we add the complexity of managing are made simple to manage by those being distributed through 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 value chain and that's why we're here. But 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 of being our 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 so 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. So distributing through a channel such as a telco is an ideal way of doing that. The telco market some of the these third party services along with their first-party data services and 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. The telco side, the telco is a great way of the total reducing churn and keeping that subscription base they can always use it to -- could be 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 talked 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 pour subscriptions, easy 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 three ecosystem 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 travel it's better for the content provider, better for the telco gives the consumer more control and more flexibility. It's the Bango DVM that's really at the heart of that.
At a very simplistic level, where 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 provided and 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, you're a telco you can connect into the DVM and you get access to all the content providers. If you're a content provider, you connect what's into 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 of the bottom with Optus, we launched MBA in less than three weeks. With Verizon, we brought 40 new services to market in 20 months and Disney with Liberty Global and Belgium launched in just four weeks.
And those times are step change from how it's been done previously. You talked to any of the content providers who tried to do some integration started directly with telcos, a quick traditionally take between six to nine 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 and you're trying to make your existing telco services more often that time to market is a huge competitive advantage.
Let's look at the highlights for 2023 and as we -- from DVM perspective, nine new DVM customers taking the total load to 18. So we doubled the number of DVM customers in 2023. We're now used by three of the top five US telcos, US 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 no way beyond just video, music and gaming, which has historically been the sort of the centre point of subscriptions now to all sorts of different services from social media, with Snapchat+ to home delivery services with Walmart+ a real variety of different services now in the digital messaging and an even more much merchants 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, but 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 colour scheme and figure how it looks and feels it makes it a lot faster for them to launch a subscription marketplace and bringing that to market.
And as we said earlier, time to market is a big competitive advantage in the telecom space. because obviously the government in 2023 was the DOCOMO digital acquisition. We completed the $21 million of synergies in the year this further optimizations over three see through in 2024. But that acquisition is now largely behind us, and Matt will go into more detail on that as we go through this presentation.
We're not just here to build a business for one year we're here to build a sustainable business in the long term and sustainability and sustainability of growth is very important to us. We want the King's Award for enterprise for international trade.
Last year, we're very proud to be one of the first winners of the King's Award a record employee engagement score of 79%, which is way above industry average, given the fact that without twice the size we were a year before is real testament to the strong culture in Bango and focus that everybody has in being successful and making Bango the place where people subscribe.
And some great things in there and some great learning, some great feedback from that service I was to make, I've got even better company to work for. Continued our commitment to carbon neutrality to be net zero by 2040 put some more rigor and that given the size of the company now with the after the acquisition as we 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 a critical when you're becoming such a critical component for some of the largest companies in the world, be that subscription providers like Netflix and Amazon, Microsoft will be that some of the larger telcos in the world like Verizon and T-Mobile.
Security is very important. And so we maintain and extended our ISO27001 a security certificate last year. So it's not just about building against the results and it's about building a results that's sustainable for the future.
So with that, I'll turn over to Matt, we'll go through some of the financials in more detail.

Matthew Garner

Thanks, 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 three to one [$3 million of revenues that moved up the year. The $2 million of additional costs that relate to some of the document required routes and $1 million] of the effect on the inter-company 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 of the financial summaries in the key areas of results for 2023. A 62% increase in revenues of the buyer 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 76% increase in annual recurring revenue, predominately 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 loan.
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 all recognize in that period.
However, where we did improve we had rapid growth in the transaction revenues, which went up to [79%] in 2022. So this came from not just the organic area of using a full year of document digital access from the acquisition. But also if we annualize that DOCOMO digital revenues from 2022, you can see we also had an underlying 5% increase in DCB payments business.
Where we also saw an awful lot of increase within 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 see here that they are both came not only from the existing customers, so we saw their saw that net retention of [137%] this the new metric that we put in place that shows the increase of between the beginning and end period at the same cohort of customers. Looking at cohort of customers beginning of '22, when their revenue ended up at the end of 2023.
Not only seeing that, but also seeing an increase from new customers who had nine new DVM deals signed in 2023. And during the course of the first quarter of 2024 we also announced the top five US telco. We're just going to add a minimum of [$22 million AAR to this year. Also see from the graph on the right hand side, the progression of that ARR, and we've been putting the March number at $11 million], should that increase is continuing 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 of some of those costs continued through past year 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 are 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 starts to become revenue generating. We had some exceptional items as well coming from the closedown of the discontinued business with document digital and right down of some development costs from the old DDL platform.
In terms of EBITDA, H1 was obviously negative EBITDA of [$0.2 million but we moved to $6.6 million EBITDA in H2, giving us an overall $6.4 million, as I said, up 29% on 2022. Trading Update did include FX of $1 million] FX on inter-company loans.
We discussed this loans are inter-company items that was set up by DOCOMO prior to our acquisition and our funding items with no fixed term end and is up to discussion with the auditors. We've agreed that they should be moved and FX settlements should be moved to reserves now.
Going back to the synergies and the acquisition elements from DOCOMO digital, you can see that we achieved the $21 million of cost synergies at the end of the year. And at the same time, we expect that there'll be a few more of those ones as we move forward from the DDL platform is continuation 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 at the right to the end of the year, there will be increased cost of sales from the DOCOMO 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 that we've enjoyed previously. Another new split that we're giving, which hopefully will give some insight into some of the investment in CapEx that the Bango does.
Obviously, this is all done 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, the end development and also the platform development.
You can see the plan is for 2024 for those that R&D capitalization to reduce as obviously the migration work that we've been undertaking during '22 and '23 cases. But there's continued investment obviously in DVM and payments business, 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 2023 investment.
Looking at cash movements, see obviously, one of our main uses of cash is in the investment in R&D, which we referred to previously. And we also see that we took we had some reduction in our working capital with working capital movement of negative [$3.1 million], but still good generation from a cash from operating activities.
We took a loan from NHN, one of our key investors during the course of the year and at the half year, but $7.9 million, which was lower than the indicated $10 million that we noted during 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 GBP3 million sterling overdraft facility with our bank, which is undrawn at the end of the year.
Quick run through on the income statement, just showing comparative 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 a fairly normal from previous years, but we also impaired that business as the decision was made to wipe that business down during the quarter '24 that we impaired in 2023.
Some final summary of the financial elements for this year seems strong revenue growth. We have a payments business, which is continuing to grow. The DVM business is rapidly accelerating and ARR is giving predictable revenue growth stream.
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 of costs. And the payments business, we'll further reduce the costs in 2024 and beyond.
We do have sufficient cash to fund the operations and the R&D CapEx that we have anticipate to do during 2024. We have an overdraft in place to give us a buffer. And the two to remind people in those plants 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 pack to Paul.

Paul Larbey

Thanks, Matt. So in the final section. I wanted to spend a little bit of time 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 feature perspective.
If we step back and look at the market, I think there's no doubt that the subscription economy is growing. We probably will 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 very fast growing, fast-growing subscription economy.
And already a big portion of that is delivered through channels and then in particular, telcos and telecoms historically have always been a place to go for entertainment services. So those entertainment services went over-the-top services like Netflix and Disney and no TV cameras, telco remain the natural place to go to, to get access to those services. And even today, I think it was 17% of those video services delivered of bundles that were telco and that's only set to increase.
And then you look at the other entertainment services and today is over $25 billion worth of entertainment subscriptions have all been 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 the estimates range anywhere from 25% to 50%. So it's somewhere between $150 million or $300 billion of subscriptions will be delivered through telcos. And that's exactly what Bango on the digital vending machine sales is at the inception of that big subscription economy that's growing being increasingly delivered through channel.
So why telcos and I have included here a few clips that you may or may not have seen in the news you've been following the some of the big telcos, in particular, large European telco CEO's on multiple occasions, the most recent being back at Mobile Congress in Barcelona in February this year.
I've been talking about orange and touch Telecom 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 over the top most of that from companies like Netflix and Amazon and sort of Microsoft.
And so they've been campaigning with you for some time now to have a charge for that particular topic and they charge for carrying that traffic over the EU, let them merge and combined together so they can save CapEx and then sort of build that works together, ensure that works and obviously in the UK discussions ongoing between Vodafone and three at the moment.
So that's been the message from a lot of the European large telco players and was certainly evident back in the lower growth in February this year. But we think there's another alternative and then this other alternatives is being increasingly adopted and that's to monetize all that traffic that you're carrying anyway in a different way by entering the value chain.
And how do you do that, you monetize your network assets, your customer relationship, building relationship, your ability to market to customers by bundling and selling these third parties predictions because you're carrying the traffic over your network. So why not playing the value chain and extend your and protect your core network services by playing the value chain and selling these subscription services to your customer.
Because we know that the consumer demand for it, we know that we have two new subscriptions. We know that the complex to manage mobile service we don't know people want to see the model play. So there's a great opportunity to monetize non-network assets, change your position in the value chain.
And as you can see here, that's exactly what Verizon have been doing. And you see the comment here along from the Verizon CEO on about 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 the catalyst.
But that in terms of changing that position in the value chain and helping them monetize the assets through investing in a slightly different way. And there's the Verizon CEO says that it's also great for the content providers.
Well, as we've seen in 2020 last year, but it's an increasing number of content providers go into the Bango DVM and relying on the Bango DVM to find new customers. It's now not just about the movies and 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 becoming beyond some of the gaming services like Xbox, Nvidia actually shown some other lifestyle services forging and health services, security products, productivity products.
Reading different types of EUV services for American LEGO we do sort of educational services through different types of education and food and recipes and home delivery more and more services are now being delivered by both subscriptions.
And we 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 present the digital vending machine a lot of the questions from operators and the merchants were about what's the business model, how does it work when you say super bundling, what do you mean only a few months ago.
So just one year after that this year, the discussions have changed all about how can we launch, how quickly can we launch, how can we do it faster. And so that's really the message is out there and more and more operators are now coming up and approaching us.
Sometimes called we're up in the 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 tradeshows and say, look, I want to be bundling asphalt into three different versions and they all tell me to talk to you and that's really where we've got to know is the power of Bango being associated with the bundling of subscriptions is a very strong message and that makes us available to sort of converge and to drive this momentum forward even faster.
And we have merchants recommending telco to Bango. We have telcos recommend the merchants the Bango and then super bundling, which is a phrase we coined and defined only a few years ago, widely used across the industry by tech journalists, by analyst use the term super bundling is always the thing that's existed.
And it's a phrase we adopted to describe this subscription marketplace, not just having one or two services, but tens of different services together become an industry standard server that's exactly what we're trying to do. As Bango is find always 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 they able to get -- if you got telco get access to the grid, the world's greatest content providers be able to put all those in one place 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. First, there are three key elements to drive our investments in the digital vending machines by helping content providers mean 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 titles launch even more quickly, how do you get the lower even more services even faster than they can already. And how do you give the consumer more control over their experience and a better overall experience in terms of how they manage only variety different subscription services that we all have today.
As a technology company it's innovation in these three areas that will keep us in the forefront and keep us ahead of all of our competitors in this market space. And that amendment is a 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 marketing team in 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 marketing bundles by connecting to different subscriptions together owning that and into easily configurable ways really, really important.
It allows us to more subscriptions faster it allows operators to trying new things. And it gives us that means reflecting more and more data about what subscriptions are being are 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 credit the offer and how is it going to be discounted for a period of time is going to be free for a period of time.
And has there been any operator that sort of approval chain around that. So again automating that so you can more quickly and easily try and use discounting more try new bundles and be able to not only put that in place, get approval of it and how it published and then automatically through workflow is a really, really important part of an ongoing sort of product investment, which has been sort of collected more data allows us to generate even more recommendations.
So we're taking any guesswork that the marketing team to the operators have because we have that volume data. And we know what works and we know the right subscription models are. The user interface is important part we've launched user interface in 2023. We'll expect that to see commercial with customers in 2024.
But really, we did it to create this sort of prebuilt product where the operator can more quickly take to market because we are finding that we've signed a contract that there's a large gap or the operator built this user interface and create this in trade 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 we actually want a great opportunity for us is to build that ourselves, allow the operator to brand it. So it's purely branding exercise the actual mechanics of the consumer interface are there and one of the advantages to us of that it allows us to capture even more consumer data.
We know just don't see what consumers have actually subscribed to. You see what they looked at, how they explored it, how they navigated the user interface. And again, that there's massive power in that data to lowest even becomes an even better product and differentiate ourselves even more forward.
To wrap up, let's look at the growth drivers. There are four key growth drivers for us moving forward. It's locked into the DVM contract we won in '23 those nine new contracts getting those live so they can start generating revenue.
Growing the existing customers, being able to generate even more success for those customers. So they start to climb up through the licence tiers. So winning new DVM deals, it's while exploring other verticals outside of telco with 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 since launching back in March, we issued the RNS when a third tier one US telco loans that generated an additional $2 million ARR. We now have three of the top five telco and ARR we're from $8.8 million at the end of the year.
So the [$10.8 million in March, we exited the quarter with about $11 million] that's partly due to the launches of existing customers, but growth on existing customers. Matt talked about the net retention figure really, as you can see existing customers are start to grow, and that will really be the second phase of the growth in '24 and 2025 as those large telcos climbed beyond the initial tier into the second, third and fourth tier.
And new DVM wins, we signed four new DVM deals in Q1, given the we're always sort of lots of deals get wrapped up in Q4, we saw that last year, we signed the nine deals we signed in the year five in December. So Q4 was busy time because telcos have budget years and individuals have objectives that they try to wrap up in their calendar year
So Q4 lot of things get wrapped up in Q4, but the fact that we signed four in Q1 is testament to the other thing we should talk about in the trading, which was the strength of the sales funnel, the sales funnel 7 times larger than it was a year ago, but not just larger with the deals more advanced and you see that by the fact that four of those dropped out in in Q1.
And then in terms of other verticals that offer financial services within in Q1 '24, again, up in a financial services company called subscriptions as part of their product offering. Still think we really believe that telco will be the largest bundling channel, but clearly there other channels were 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. And so it's probably a good point, I think to maybe dive into some Q&A. So let's dive into the Q&A.

Question and Answer Session

Operator

Paul, Matt, that's great. Thank you very much indeed for your presentation this morning. (Operator Instructions)
And 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 and throughout your presentation this morning.
And 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.

Sukey Miller

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

Matthew Garner

Sure. Thank you. First of all, it's important to highlight these intercompany loans which where the FX impacts that are non-cash impacting. These were set up predominantly, but with the document 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.
Traditionally, hedging looks to a maturity date is fixed at hedging against an end date when the repayment comes into play. So obviously that's not a applicable sensible route for the FX that we have here. What we are doing is working with our tax advisers to find the most 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.
During that time, obviously as they are investments effectively and the treatments that we've agreed with the auditors after the end of the year was that would fall into our reserves movement. So that's an element on those and so what we're doing is we're looking to convert those are the best way and some result 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 as.

Sukey Miller

Thanks, Matt. One for you Paul, there are a number of questions on US and why this is reported as a KPI anymore?

Paul Larbey

Yeah. A good question. So we stopped reporting you spent that's a big game in an old KPI quite a few years ago. And that's we last reported, I think at the full-year results in 2022 and at the time the annual results this year, we said the reason we don't think that's a 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 revenue and user spend, and that's our sort of fee for processing in that transaction includes quite a tight correlation. Within the digital vending machine model were operated by tiers of subscription and that the linkage between the two is broken and the very simplistic level on a license starts that will be zero and use the 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 in the results for 2022.

Sukey Miller

As a as a follow-up to that, Paul. There is a question about previous statements on the US rights being about 30% and now we talked about mid-single digits. Can you help investors understand that?

Paul Larbey

Yeah. I think there's sort of two different budgets when we talk about the sort of a high-growth to spend a lot of that is coming through the subscription services through the digital vending machines or whatever the annual spending in the platform. That's not as I said, not the measure we track anymore, it's growing at a very fast rate that mid-single digits is basically the revenue growth from that payments business.
So that large payments business that we have that we know sort of split out, you see that in the numbers that Matt presented earlier. Really bolstered by the note one digital acquisition that took us forward a couple of years in terms of the growth for that business really will continue to grow.
Overall that sort of mid-single digits depending on different launches in different app stores that 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 my slides is really focused on the neutral vending machines on the payments business.

Sukey Miller

Okay. And switching topics now back to you Matt. There were a number of questions about the timing of the January trading update and why it was issued earlier?

Matthew Garner

Thank you, Sukey. Obviously, it's down to those three key issues that I brought up during the course of the presentation. So the FX impact, which obviously only materialises 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 was completed during the course of the audit.
The additional costs from the 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 document acquired, it really didn't crystallise 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 ones, they are reducing within '24 and 2025, we expect to see those margins going back up to the 90% plus that we had full.
And the final one was in relation to those revenues, the $3 million of revenues. But these were, as Paul spoke about when he is 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 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 profit.
For those items just meant that we were slightly delayed in our release but a lot of those all three of those items you can see really didn't happen right until the end of December. We then obviously assured that those the right treatment and then updated as quickly as we could after that.

Sukey Miller

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?

Paul Larbey

Yeah, sure. I mean a drop in share price given the space, the profitability miss is not unexpected. I think what was the surprise was the level of the drop. And as I said at the time in our view it was a it really matched what was a solid year, we grew revenue by 62%, EBITDA grew by 29%. Digital leveraging that key growth items of the business are growing by 76%. We've delivered another 25% growth on top of that of the 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 side of the drop was even more disappointed because we thought it already came from a lower 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 it 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, the lowest to sort of repay at the NHN level, but more importantly invest in the digital vending machine moving forward.
Share options is something we're very focused here, Bango, I put our we saw our employee engagement score a little bit earlier before you picked out, there's everybody in the company gets options twice a year just after we issue results.
Options are a big motivator for the Bango team and then which we want everybody in Bango to be an act as a shareholder of business and help drive that growth forward. And you see that in our employee engagement results and you see that in the energy in the teams and the innovation that the teams grid in driving the business forward.

Sukey Miller

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

Paul Larbey

Yeah, So all believe there's huge potential in in purchase behaviour targeting and be able to use the data that we have to help people find new services and find new paying customer for subscription services and as well as for other services.
And we thought that we productize that through Bango audiences, which was our way of doing, taking this approach behaviour targeting technology as we called 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 sort of gotten some great results.
And the potential was limited there but I think what was clear to us is that the potential and the digital vending machine with this switched to a subscription economy was absolutely just it was really there and it was live thing was real. Now as a company, we want to make sure we focus when I put all our efforts behind this, a single project that's the digital vending machine.
We took the decision to take the audience team and the technology and fold 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 and buying audiences and they want your subscription services for their games and their different apps. So it makes sense to bring the two together and really it's all about focus and making sure we can drive the business forward.

Sukey Miller

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

Matthew Garner

Yeah, sure. Japan’s always been a had already is an important market for us with the exclusive integrator for Amazon and we're allowing customers of the three telcos. So that's DOCOMO, KPI and SoftBank to purchase physical goods from the amazon.co.jp store.
These they then charged to their phone, which is slightly unusual compared to European and Western markets. Obviously, in parallel with the document acquisition, we also settled a long-term multi-year deal to support all event, NTT DOCOMO's carrier billing. So that means we now process all their app store transactions along with airline tickets and margins from shops.
This has increased Robinson and ended up sort of more DCB opportunities with the other two carriers. And what's the largest DCB market in the world. And also more importantly, it's also helped us in several DVM opportunities that are now ongoing, we're exploring.

Sukey Miller

A number of questions on the DVM opportunity. Paul, can you comment on how big this could get?

Paul Larbey

Yeah, I mean, I think we see it's clear. I spoke about it a little bit in the presentation where this -- we have this subscription economy that's going to over $600 billion increasingly delivered through a channel estimated anywhere between 25% and 50% of that being delivered through the telco channel alone.
And that's really where Bango digital lending sits at the heart of those subscription services being delivered through a channel. So for us, the potential issues, you don't need to take many steps for subscription to really create a significant business value from the telco space alone.
This is a [$100 million ARR business. We exited the year at $8.8 million, we exited the quarter at $11 million]. We're on a path clearly to get there, but that's really the path we're on to capture these really high-growth markets.

Sukey Miller

A question on costs. Other costs are up from $3 million to $11 million. Why sharp increase and what can be done to get back to control of them.

Matthew Garner

Okay, I covered that a little bit during the presentation, we've got the first year of the full year cost of DOCOMO in the course of '23 and also the synergies that we have the $21 million of synergies of they started partway through each of the asset.
During '23, we still had some of those costs that we've subsequently got rid of. So in compression about the control going forward, you'll have we should expect to see the synergies, the $21 million synergies having more of an impact in in 2024.
We've already covered the fact that from some of the R&D aspect that R&D capitalization will drop down. And also at the end of '24, when we closed the DOCOMO platforms that are still running to help us see some further cost savings from there as well.
And we have other triggers if we need to, but that should then help to control those costs and lead to that high level of EBITDA profitability.

Sukey Miller

Similar theme revenue growth is good the capitalized development costs rise to $17.6 million. Can you explain why this is so high and what is being obtained because of high investments?

Paul Larbey

It's obviously great technology company and as a software company that investment is all in sort of the intangibles as finance people companies, that is the software development and the innovation in software that form part of the Bango platform that allows us to launch these services in a matter of weeks. It allows us to use the data that we collect to make the merchants even more successful to telco to offer this service more quickly using the consumer interface those are all the things we are investing.
You saw in maths the graphic maths chart investment in the digital vending machine has continued to increase in the CapEx sort of peaked in 2023 because on top of that we had some investment we needed to do in tools for migration to migrate the DOCOMO digital routes over onto the Bango platform
And what you see is in 2024 that migration, that level of investment disappears and actually the investment in the payment in the CapEx and the R&D we need in the payments business to keep that business moving forward.
It's like slightly less means that business generates even more cash. So really the investment for us is important that we stay ahead of the market we stay ahead of the competition. That time to markets is really a big differentiator at the moment then nobody can match. But moving forward, it's moving beyond that sort of tighter marketing to the value using the data we have to make people more successful. That's why folding in the audience's business, really that's make sense.

Sukey Miller

Question on consolidation. Are you looking at consolidation or just fixing on our own strategy without distractions?

Paul Larbey

So we've always been a company that's really focused on sort of organic growth where we've done acquisition that's been to scale of the business very quickly. The DOCOMO digital was sort of the perfect acquisition, very low purchase price on the [900,000] net when you took some of the cash out of the business that they had in at the time.
Give us a long-term contract with NTT DOCOMO, the largest operator in Japan. And it really gave us critical mass in our payments business, which allows me to be very cash-generative moving forward while still growing at a mid-single digit for years, so it gives really gave us that sort of scale prior to that the acquisition that we did with to bring some technology allowed us to be able to segment data and be able to use that in marketing platforms.
And again that that that became a key part of the product and it is really important in the back of digital vending machines. So we'll do acquisitions where it can help us accelerate our organic strategy where it can help us accelerate our organic strategy.
But we're not about just acquiring semi related businesses just to grow as you can see from the results, we have enough organic growth opportunity ourselves and then having to do all these acquisitions and the complexity, the food acquisitions supports a hit to our multiple on somebody else's revenue. So organic is really what we're focused overall. We'll do acquisitions that can help accelerate our organic growth more.

Sukey Miller

Follow up question on strategy and thinking and this is quite a different presentation compared to previous with the emphasis on DVM. Clearly impressive technology with great growth potential. Should we infer that the payments amongst those revenue streams are now seen as legacy cash flow elements.

Paul Larbey

I think that -- I think it's calling the payments business legacy cash flow it's also we did the acquisition to get critical mass in that business. You can see that we know break out that separately that's going to mid-single digits doesn't require a lot of investment to keep it going.
So it does generate a lot of cash for that element of the statement is clearly true, but it's an important part of the business because it generates that level of cash that allows us to in the future growth elements, but it's certainly still growing at sort of mid-single digits.
And as I said, that Bango warnings is his business we took the decision to really fold the teams and the technology into the digital vending machine. A lot of value in that purchase behaviour targeting technology but for us, we felt the better. There was a better return by really doubling down on the digital vending machine and focusing all our technology and all our growth on the subscription economy and that being distributed through channels.

Sukey Miller

We've had a question on the consumer interface when in 2024, do we expect it to go live and what are the tangible benefits in terms of potential revenue increase?

Paul Larbey

Yeah. So we expect the consumer interface to go live probably early in the second-half of the year. It's in sort of discussion and trial with a number of customers at the moment. The way we charge for that in business, the set of phase as you follow the model that we do for our original DVM business.
The set-up fee to do that initial customisation and that initial branding. And then there's an additional licence fee on top so it adds another licence fee on top of the ARR tiers that we get for this managing those subscriptions. So it is sort of ARR incremental as well as sort of a set of revenue that's where we monetize that.

Sukey Miller

Thank you to everyone who's asked a question. We've answered all that come in so far, say if there are any additional ones we can address those after the presentation, I will come back to Investor Meet Company.

Operator

Perfect. Sukey, Paul, Matt, thank you very much indeed for addressing all of those questions that came in for investors. And of course, if there are any further questions that do come through will make these available to you immediately after the presentation has ended.
Just need to review to then add any additional responses, of course, where it's appropriate to do so. And we'll publish those responses are on the platform. And the Paul perhaps before really just looking to redirect those on the quotes, provided their feedback, which I know is particularly important to yourself and the company. If I could please just ask you for a few closing comments to wrap up with that would be great.

Paul Larbey

Yeah. Firstly, I'd like to thank everybody for taking the time and for submitting the questions. It's much easier to do this when it's engaged and there are questions so we really do appreciate that. And as mentioned, if you have follow up ones, then please do get in touch. You can always in touch through our investors, Bango investor website or emailing us at investors@bango.com.
2023, was really a transformational year we completed the integration of that acquisition challenges are right at the year end, which led to us meeting that expectation and really mass, which was a really solid year of revenue growth of 62% EBITDA growth of 29%, really positioned for accelerated growth this year.
Recurring revenue that DVM stream as we see continued to grow up from the [$8.8 million ARR and flushes through to the $11 million] at the end of Q1. And we are in a position where we have zero debt net of cash to sales through capital will be cash flow positive this year, we'll use that to pay down the NHN loan.
We're not going to come back to the market to raise money, the business is structured well, the sales pipeline is really strong, DVM opportunities play with that $600 billion subscription market and what he had to execute on that.
Thanks everybody for your support, and I look forward to reporting the progress as we go throughout the year. Thank you.

Operator

Paul, that's great. And thank you once again for updating investors this morning. Could I please ask investors not to close this session as you'll now be automatically redirected for the opportunity to provide your feedback in order that the management team can really better understand your views and expectations.
This will only take a few moments to complete, but should be greatly valued by the company. On behalf of management team of Bango PLC, we would like to thank you for attending today's presentation. That's now concludes today's session. So good morning to you all.