29 March 2022

 

Boku Inc.

("Boku", the "Company" or the "Group")

 

Results for the year ended 31 December 2021

Boku (AIM: BOKU), a leading provider of mobile payment solutions, is pleased to announce its audited results for the year ended 31 December 2021.

Group Financial Highlights

·	Group revenues increased by 23% to $69.2 million (2020: $56.4 million**)
·	Group Adjusted EBITDA* up 31% to $20.0 million (2020: $15.3 million)
·	Net Profit before tax of $4.4 million (2020: $17.3 million loss)
·	Closing cash balances were $62.4 million at 31 December 2021 (including restricted cash balances of $5.8 million) up from $48.6 million on 30 June 2021
·	Monthly average cash balances, which smooth the impact of intra-month flows of both carrier and merchant payments, were $50.8 million in December 2021 up from $38.0 million in June 2021
·	Cash generated from Operations before working capital changes during the year was $19.5 million (2020: $11.5 million)

 

Payments division highlight

·	Payments division revenues up 21% to $62.1 million (2020: $51.2 million**)
·	Payments division Adjusted EBITDA* of $22.9 million (2020: $19.2 million)
·	Monthly Active Users grew by 3.5 million to 32.3 million in December 2021 (December 2020: 28.8 million)
·	Total Payment Volume*** ("TPV") up 18% to $8.2 billion in 2021 compared to $6.9 billion in 2020
·	Continued progress in building out Boku's mobile first payments network 'M1ST' which now reaches over seven billion end user accounts. Four billion of those are Direct Carrier Billing connections, three billion are from other payment methods like eWallets and Real Time Payments.

 

Identity division highlight

·	Identity business sold to Twilio after year end for up to $32.3 million on 28 February 2022. Cash receipts of $26.2 million received with balance due in 2023, contingent on the delivery of certain performance terms. Group term loan paid down in full from proceeds
·	Identity revenues up 37% to $7.1 million and reduced EBITDA loss of $2.9 million (2020: $3.9 million EBITDA loss).

 

*Adjusted EBITDA: Earnings before interest, tax, depreciation and amortisation, impairment of goodwill , non-recurring other income, stock option expenses, Forex gains/losses and Exceptional items

** 2020 comparatives include six months of revenues and costs from Fortumo acquired 1 July 2020

*** TPV is the $ value of transactions processed by the Boku and Fortumo platforms

 

Jon Prideaux, Chief Executive of Boku Inc, commented, "We are pleased with our performance in 2021. Going forward, 2022 will see the emergence of Boku as a pureplay payments company, with the leading position in Direct Carrier Billing and rapid growth in other local payment methods, such as eWallets and Real Time Payments. We will invest further in building out our network and systems.  This year we will broaden our M1ST network, grow existing merchants, recruit more new merchants who do not use us for DCB and expand into new territories. Non DCB payments will, for the first time, be a material part of our growth.

"Trading so far this year has started well,  with growth in eWallets and Real Time Payments to the fore. MAUs on these methods exceeded 1.4m in February - ten times the figure a year before. Our cash balances are strong and I look forward to the remainder of 2022 and beyond with considerable confidence."

Investor Presentation

The Company will provide a live investor presentation relating to the results via Zoom at 5.30 pm today.  The presentation is open to all existing and potential shareholders.  Those wishing to attend should register via the following link:

https://us02web.zoom.us/webinar/register/WN_na06mT37Rfi4-Z0fEJQVnQ

There will be the opportunity for participants to ask questions at the end of the presentation.  Questions can also be emailed to [email protected] ahead of the presentation.

Enquiries:

Boku, Inc. Jon Prideaux, Chief Executive Officer Keith Butcher, Chief Financial Officer	+44 (0)20 3934 6630
Peel Hunt LLP (Nominated Adviser and Broker) Edward Knight / Paul Gillam/ James Smith	+44 (0)20 7418 8900
IFC Advisory Limited (Financial PR & IR) Tim Metcalfe / Graham Herring / Florence Chandler	+44 (0)20 3934 6630

Notes to Editors

Boku Inc. (AIM: BOKU) is a leading global provider of mobile payment solutions. Its Mobile First Payments Network 'M1ST' features 340+ mobile payment methods, including mobile wallets, direct carrier billing, and real-time payments schemes, reaching over 7 billion mobile payment accounts in 91 countries - all through a single integration.

Customers that trust Boku to simplify sign-up, acquire new paying users and prevent fraud include global leaders such as Amazon, Apple, Facebook, Google, Microsoft, Netflix, PayPal, Sony, Spotify and Tencent.

Boku Inc. was incorporated in 2008 and is headquartered in London, UK, with offices in the US, India, Brazil, China, Estonia, France, Germany, Indonesia, Japan, Singapore, Spain, Taiwan and Vietnam.

To learn more about Boku Inc., please visit: https://www.boku.com.

 

CEO Statement

The second year of the pandemic

Despite being in the second year of the pandemic, it was another year of significant progress for Boku as we navigated choppy waters to continue our record of growth, in spite of continuing distortions to normal life and trading patterns.

Our Group revenues grew by 23% to exceed $69 million. Profitability, measured through the Adjusted EBITDA measure, increased by 31% to $20 million. We battled some currency headwinds in the year - the Japanese Yen and Korean Won were both down by more than 10% against the US Dollar - had exchange rates stayed constant our results would have been better yet.

Boku Payments

The Payments division performed well in 2021. In December 2021, 32.3 million users made one or more transactions on our platform, up from 28.8 million a year earlier. Taking the year as a whole, on average, every day more than 2 million users were making purchases on Boku's platform.

The spending of these users translated into revenues up 21% to $62.1 million as we saw total processed value ('TPV') increase 18% to over $8.2 billion (2020: $6.9 billion) and Payments EBITDA grow to $22.9 million (37% EBITDA margin) in 2021.

Merchant Focus

It's quite deliberate that I started the review of Boku's Payments division by reference to the number of new users that we'd helped our merchants to acquire. Any chief executive will tell you that the key to their success comes from focusing on their customers' needs. It's become a platitude. Key to Boku's success is a focus not just on the nuts and bolts of payments - although that is important - it is that we try to look through the 'what' to the 'why'. Why would a merchant want to give their users more ways to pay?

When you boil it down, there is one overriding reason why merchants are driven to support a new payment method. It's not because it's more secure, or even because it's cheaper than the alternative - price can be negotiated. The real reason why a new method gets established is due to its ability to help the merchant sell more.

How can a new payment method help a merchant make more sales?

·	It can unlock access to new users who simply can't pay with traditional payment methods like credit and debit cards (particularly relevant given the dominant payment method in much of Asia is now eWallets and not cards).
·	It has a better user experience, enabling greater conversion on microtransactions (whereas higher friction methods will lead to higher rates of abandonment).
·	It increases purchase values by offering credit, or buy now, pay later functionality.
·	It increases purchase frequency due to a loyalty scheme.

 

In all of these cases, it is the prospect of extra sales that impels the merchant to make the effort of deploying a new payment method.

In the case of Boku, we enable our merchants to sell more by helping them to more easily and cost effectively acquire new users. Our Direct Carrier Billing ('DCB') service acquires new users through reach - more people have phones than bank accounts, and also through simplicity - it's easier to make a purchase with a single tap, than having to laboriously type in your card details.

Our local payment method business provides the same benefits. It allows users to pay with their preferred method. Many of the emergent middle classes of Asia, the Middle East, Africa and Latin America don't have payment cards (even though, in the main, they do have bank accounts). Having previously made their purchases in cash, as they acquired mobile devices, they use mobile native payment methods, like eWallets, to buy things online. If you want to sell to these people, you have to support the payment methods that they actually use.

It is for this reason that the New User metric that stands front and centre for Boku. As far as I know, we are the only payment company that focuses on this metric. Others brag about the value that they process or the number of transactions that flow through their systems. Our focus is on the things that matter to our customers.

Subscriptions driving change in Payments

What do the following have in common? Toothbrushes, music, toilet roll, snacks, cosmetics, random vegetables and video? You can buy them on subscription services. One-off purchases are being superseded by subscriptions because of the benefits to both buyers and sellers. Buyers get the latest products conveniently; sellers get predictable revenue streams. To meet this changing pattern of commerce, payment methods also have to adapt: new features need to help in customer acquisition, simplify repeat purchases, and boost customer retention.

This is one of the things that differentiates Boku. Our products are optimised for the age of subscriptions. Our bundling products support co-marketing between brands, our customer onboarding technology allows consumers to sign up with a single tap, and our messaging capabilities can prompt users whose renewals have failed.

Direct Carrier Billing

Boku has established itself as the leading Direct Carrier Billing company in the world. Our solutions are proven with world's largest digital companies: Amazon, Apple, Google, Sony, Microsoft, Meta Platforms (Facebook), Netflix, Spotify, Tencent, Activision, Epic Games and DAZN all use our carrier billing or bundling services, many on an exclusive basis. Growth in the DCB business can be driven by the expansion of Boku's network of mobile network operators and, more importantly by the expansion of the merchants' usage of that network. With the average merchant connected to 10% of the carriers in the network, there is 90% still to go for. Plenty of room to grow.

Larger Market with Local Payment Methods

The Company will carry on benefiting from growth in DCB, but the Total Addressable Market ('TAM') from deploying local payment methods such as eWallets and Real Time Payments could be fifty times larger. Direct Carrier Billing helps grow digital entertainment, but is ill-suited to other types of merchants, such as consumer durables, transportation or foodstuffs. It's also a supplementary method, with an effective ceiling: In practice no more than around 15% of even a digital merchant's sales will be charged to the phone bill. The larger TAM comes from supporting the payment methods that consumers and businesses use for all of their daily purchases. In the West, that daily payment method is generally a credit or debit card, but in most of the rest of the world, consumers instead rely on eWallets and Real-Time Payments to buy things online.

Launch of M1ST

2021 was the year in which Boku's efforts to expand beyond DCB into these mainstream methods of payments - eWallets and Real-Time Payments -- started to bear fruit. We launched M1ST, our mobile-first payment network, and recently expanded its reach to over seven billion accounts in more than 90 countries. Four billion are connections to mobile phone accounts, and, impressively, three billion are for other mainstream local payment methods. These mainstream payment methods are regulated: we have also put significant effort into expanding our ability to process regulated payments, ending the year with a network spanning 50 countries. Boku is now regulated as a payment provider in Hong Kong, allowing us to process in China; in Singapore, where we have a Major Payment Institution Licence; we have a specific authorisation from the Reserve Bank of India allowing us to provide services to foreign merchants and a network of other authorisations and partners allows us to undertake regulated payments in 50 countries. These are capabilities which will help fuel our growth in future years.

By the end of the year, the number of monthly active users on these mainstream methods was more than 1.1 million. In absolute terms, this is a significant milestone, but when set against the group's total of more than 32 million, it was still relatively small. Looking only at new users, non-DCB was more significant with 2.7 million new users making their first-ever transaction with Boku at some stage during the year, compared to the annual new user total of 28 million (9.6%).  Non-DCB users (eWallets and Real Time Payments) grew nine-fold during the year and it is this rate of growth that is encouraging.

We have been able to win significant new deals against much larger companies. Boku has been selected to provide local payment services to the world's leading digital advertising platforms, console games providers, video and music streaming services, as well as several gaming companies. We're winning those deals because we typically have wider coverage of relevant payment methods and a wider list of features that matter to our merchants, including support for subscriptions.

Sale of Boku Identity

Boku acquired Danal Inc., a US-based provider, in 2019 for total consideration of $25.1 million and renamed it Boku Identity. As mobile commerce grew, there was increasing demand for a service that could easily identify phone numbers and phone owners. With our network of mobile operators, we felt we were well placed to build a global business.

The division posted improved results in 2021 as the strategy of building a global network started to pay off. Revenues were up 31% to exceed $7 million and losses fell to below $3 million. However this success also posed a dilemma: further growth would require further investment, at precisely the moment when our Local Payment Methods were gaining traction and required investment.

Ultimately we resolved the dilemma by selling Boku identity to Twilio for a transaction value of $32.3 million in February 2022. I want to place on record my thanks for the work of the Boku Identity team and management. Twilio will be a good owner of the business, one that can provide it with the investment and support that it needs to grow faster. At the same time, it allows Boku to concentrate on its Payments offering.

Board Changes

At this year's Annual General Meeting, our Chairman, Mark Britto, who founded the Company and served as its first CEO, has decided to relinquish the Chair, though he will remain on the Board as a Non-Executive Director. I want to place on the record my thanks for his wise counsel and leadership. Under his stewardship, the Company has grown considerably, and I am very grateful to have continued access to his experience and input.

I am also indeed fortunate that the Company has a worthy successor in Richard Hargreaves. Richard has served on the Board since 2016 and knows the Company well, having also served on the Audit Committee and as Chairman of the Remuneration Committee. I am delighted to welcome him to his new position.

Ukraine situation

Russia's attack on Ukraine is a tragedy for the people of that country. Although we have no employees or operations in Ukraine, we have a number of Ukrainian employees. Their families are uppermost in my thoughts. Boku has made a donation to support relief efforts; employees have also responded generously. Boku will further match their donations.

Commercially, we have no Russian merchants, nor assets in Russia. Nor do we have Belarussian or Ukrainian ones. We do have connections to Russian carriers - as we have connections in 90 other countries - and, before the war, used them to process transactions for 24 merchants. Almost all of them have stopped processing. Revenues from Russia, Belarus and Ukraine are not material. Given the fluid situation, the precise impact is difficult to estimate with certainty, but the worst case is approximately 2% of revenues in 2022.

Summary and Outlook

We are pleased with our performance in 2021. Going forward, 2022 will see the emergence of Boku as a pureplay payments company, with the leading position in Direct Carrier Billing and rapid growth in other local payment methods, such as eWallets and Real Time Payments. We will invest further in building out our network and systems.  This year we will broaden our M1ST network, grow existing merchants,  recruit more new merchants who do not use us for DCB and expand into new territories. Non DCB payments will, for the first time, be a material part of our growth.

Trading so far this year has started well, with growth in eWallets and Real Time Payments to the fore. MAUs on these methods exceeded 1.4m in February - ten times the figure a year before. Our cash balances are strong and I look forward to the remainder of 2022 and beyond with considerable confidence.

Jon Prideaux

Chief Executive Officer

28 March 2022

 

Chief Financial Officer's Report

Strong Revenue and Adjusted EBITDA growth

Group results

2021 was another year of significant progress and achievement for Boku, despite continued challenging circumstances given the coronavirus pandemic and significant currency headwinds affecting the Payments division. Good revenue growth in both Payments and Identity saw Group revenues increase 23% to $69.2 million which in turn drove an increase of 31% in group Adjusted EBITDA* to $20.0 million (2020: $15.3 million***) and a net Profit before tax of $4.4 million (2020: $17.3 million loss). 

After the year end an agreement was reached with Twilio, Inc. ("Twilio"), the leading cloud communications platform, to acquire Boku's Identity division comprising its wholly-owned subsidiary Boku Identity, Inc., as announced on 19 January 2022, for a maximum consideration of $32.3 million payable in cash and the transaction was closed on 28 February 2022. This enables Boku to focus on its core Payments business and building out the M1ST payments network.

Group Revenue and Gross Margins

Group revenues for the year increased by 23% to $69.2 million (2020: $56.4 million) as the Company saw good growth in both its Payments and Identity businesses, while blended gross margins for the group increased slightly to 91.7% (2020: 91.3%)

Group Operating Expenditure

Adjusted Operating Expenditure (Operating Expenditure adjusted for depreciation, amortisation, foreign exchange, stock option expense, exceptional items, goodwill impairment and restructuring costs) increased to $43.3 million (2020: $36.2 million), partly driven by the full year effect of the Group's acquisition of Fortumo in July 2020 but also due to investment into building out Boku's mobile first Payments network ('M1ST') adding capabilities in eWallets and Real Time Payments in the second half as flagged previously.

The Payments division's adjusted operating expenditure increased to $37.6 million (2020: $27.6 million) due to a number of factors including the full year effect of the acquisition of Estonian based Fortumo in July 2020, payroll increases, and some costs incurred in completing the migration of Boku's Payments platform into a cloud based environment (AWS). Identity adjusted operating expenditure remained stable at $5.8 million (2020: $5.8 million).

Both divisions benefited from continued material savings in travel and entertainment due to the impact of COVID-19 which reduced operating expenditure and increased Adjusted EBITDA, but it is expected that this expenditure will return to previous levels as it becomes possible to travel freely again.

Payments division

Boku Payments and Fortumo Payments (acquired 1 July 2020) together form the Payments division and in 2021 the businesses were combined for both reporting and operational purposes.

 

Boku's Payments business was founded on Direct Carrier Billing ("DCB") which enables end user customers of Boku's merchants to charge payments to their phone bills, but its product suite has now expanded to offer connections to eWallets and Real Time Payments ('RTP') through its mobile first 'M1ST' payments platform. These services are provided to the world's largest digital merchants including Apple, Netflix, Facebook, Google, Amazon, Spotify and Sony, mainly on an exclusive basis.

 

In 2021 the Payments division again performed strongly, with revenues increasing 21% to $62.1 million (2020: $51.2 million**) which in turn delivered increased Adjusted EBITDA* of $22.9 million (2020: $19.2 million) demonstrating the powerful operational leverage of our payments platform as additional incremental transaction revenues largely drop through to Adjusted EBITDA. This growth was despite considerable exchange rate headwinds without which revenues and EBITDA would have been higher. We also saw typical seasonal patterns distorted by covid lockdowns particularly in Q1 as gaming merchants saw increased sales which were later offset by slower second half performance. We expect more normal seasonal patterns to resume in 2022. Growth comes from both from the existing merchant base and also from adding new carrier and eWallet connections to new and existing merchants.

Total Payments Volume ("TPV") for the Payments division increased by 18% to $8.2 billion (2020: $6.8 billion) while Monthly Active Users grew by 3.5 million to 32.3 million (2020: 28.8 million).

The blended average take rate was broadly stable at 0.75% as we saw good growth from higher take rate settlement merchants. Gross margins for the Payments division remained stable at 97% in the year

Adjusted operating expenditure for the Payments division increased to $37.6 million (2020: $27.6 million) due to a number of factors including the full year effect of the acquisition of Estonian based Fortumo in July 2020, payroll increases, some costs incurred in completing the migration of Boku's Payments platform into a cloud based environment but also due to investment in the second half, mainly in headcount, into building out Boku's mobile first 'M1ST' payments network, adding capabilities in eWallets and Real Time Payments as well as building out our sales and marketing engine as we seek to sign new merchants outside of our traditional DCB base. As flagged in our interim statement, this will increase adjusted opex in 2022, however this is a one time investment to exploit the opportunity in eWallets and RTP and we expect the drop through of additional revenues to EBITDA to increase again in FY23 and beyond.

We continued to invest in the Boku Payments platform and in 2021 completed the migration of our payments platform into a cloud-based infrastructure (AWS) from two physical colocation facilities in the U.S. which were then decommissioned. Although the total running costs are similar in the cloud, the 'pay as you go' nature of the cloud services means that we are able to capitalise less of the cost and so adjusted operating expense increased as a result. The Boku Payments Platform has the capacity to process volumes considerably in excess of today's peak message rates.

Fortumo earnout

Boku acquired Estonia based carrier billing payments company Fortumo Holdings Inc ('Fortumo') on 1 July 2020, consolidating Boku's leading position in the global DCB payments market. An initial payment of $39.6 million was made in 2020 with a further $5.4 million put into an escrow account, subject to Fortumo meeting challenging earnout targets.

 

The final earnout payment, based on Fortumo Adjusted EBITDA** performance for the 12 month earnout period ended 30 June 2021, was $2.16 million, which was paid to Fortumo's former shareholders in October 2021, with the balance of $3.24 million returned to Boku. The excess amount repayable to Boku over the fair value on the Balance Sheet at 31 December 2020 of $1.08 million has been shown as 'Other Income' in the Income Statement. It has been excluded from Adjusted EBITDA* as a non-trading, non-recurring item. The total consideration for Fortumo was therefore $41.76 million which included $4.0m of working capital resulting in an enterprise value of $37.76 million for the acquisition.

Identity division

Boku's Identity division was formed in 2019 following the acquisition of Danal Inc on 1 January 2019 for $25.1 million. Identity revenues recovered strongly in 2021 growing 37% to $7.1 million (2020: $5.2 million) as we saw strong growth from key existing customers complemented by a ramp up in transaction volumes from new mobile wallet customers in new geographies such as Indonesia. We continued to build out Identity supply with new connections added in Germany, Spain, Italy and Indonesia.

 

Adjusted operating expenditure for Identity remained low in 2021 due to continued low travel and marketing spend as a result of the COVID 19 pandemic. The strong revenue growth and low-cost base resulted in a further reduced Adjusted EBITDA* loss of $2.9 million (2020: $3.9 million Adjusted EBITDA loss).

 

Although at year end no decision had been taken to sell, an agreement was reached, after year end, with Twilio Inc. ("Twilio"), the leading cloud communications platform, to acquire Boku's Identity division comprising its wholly-owned subsidiary Boku Identity, Inc., for a maximum consideration of $32.3 million payable in cash and the transaction was completed on 28 February 2022. This enables Boku to focus on its Payments business and in building out the M1ST payments network.

 

Group Adjusted EBITDA* and Operating Profit

Group Adjusted EBITDA* increased by more than 30% to $20.0 million (2020: $15.3 million) illustrating the powerful operational gearing in the payments business. Adjusted EBITDA is earnings before interest, tax, depreciation and amortisation, adjusted for stock option expenses, forex gains/losses and exceptional items.

 

Reported Operating Profit for 2021 of $5.1 million was an increase of $21.8 million (2020: $16.7 million loss, primarily due to the goodwill impairment of the Identity division of $20.8 million).

 

The Operating Profit can be broken down as follows:

·	Other income of $1.08 million relates to the excess receipts from the Fortumo earnout escrow over fair value
·	Gross margin increased to $63.4 million (2020: $51.5 million)
·	Depreciation and Amortisation charges increased to $7.5 million (2020: $5.9 million) which included a full year of Fortumo charges in 2021 (acquired 1 July 2020)
·	Foreign Exchange movements resulted in a small loss of $0.1 million (2020: $1.0 million gain)
·	Stock Option Expenses increased to $7.4 million (2020: $4.9 million) as we included awards to Fortumo staff following the acquisition in 2020 and added headcount in the year. Boku has a policy of issuing RSUs to all staff annually. RSU charges are spread over three years from date of grant based on the Black Scholes method. Of the $7.4 million booked in 2021, $0.7 million was paid out cash (via employer's NI), the remainder was non-cash and expensed.
·	Impairment of goodwill - there was no impairment in 2021 (2020 impairment of $20.8 million which related to the write down of the carrying value of the Identity division).
·	Exceptional Items of $1.0 million mainly related to the 2021 costs of the disposal of Boku Identity (2020: $1.4 million mainly costs relating to the acquisition of Fortumo on 1 July 2020).
·	Net financing expenses were $0.7 million in 2021 (2020: $0.6 million). These costs relate to Interest on leases and bank loans/overdraft.
·	Tax credit of $1.9m (2020: $1.5m charge) relates primarily to recognition of an additional defered tax asset of $2.4 million in the year (see Balance sheet section below and note 8) which was partly offset by a tax charge of $0.5 million.

 

Net Profit after Tax

The Company reported a net profit before tax of $4.4 million (2020: $17.3 million loss primarily due to the goodwill impairment for Identity division of $20.8 million) and a net profit after tax for the year of $6.3 million (2020: $18.8 million loss).

Balance Sheet and Cashflow

·	Closing cash balances were $62.4 million at the end of 2021 (including restricted cash balances of $5.8 million) (December 2020: $62.7 million) up from $48.6 million on 30 June 2021 (unaudited).
·	Monthly average cash balances, which smooth the impact of intra-month flows of both carrier and merchant payments, were $50.8 million in December 2021 (December 2020: $46.7 million) up from $38.0 million in June 2021 (unaudited).
·	Cash generated from Operations before working capital changes during the year was $19.5 million (2020: $11.5 million).
·	To part finance the acquisition of Fortumo in July 2020, the Group took on $20 million of debt with Citibank, comprising a 3 year term loan of $10.0 million and a Revolving Credit Facility ("RCF") of £10.0 million. At year end the RCF had been paid down in full and the term loan had been paid down by $1.9 million to $8.1 million. After year end the balance of the term loan was repaid in full in February 2022 from the sale proceeds of Boku Identity.
·	Deferred tax assets of $3.1 million were recognised at 31st December 2021 (compared to $0.5 million at 31 December 2020). This reflects a re-appraisal of the usability of certain tax losses and future transaction volumes through its US and UK incorporated entities.
·	From a working capital perspective, Current Assets exceeded Current Liabilities at 31 December 2021 by $22.8 million compared with $15.6 million at the 2020 year end.
·	Intangible Assets were $63.1 million as at 31 December 2021, compared to $65.6 million at 31 December 2020 due to amortization of certain intangibles. Following the disposal of Boku's Identity business which was completed on 28 February 2022 and as noted in PBSE (note 26) we have assessed the Identity CGU intangibles and determined that as the fair value less cost of disposal is greater than the value of the intangibles in the group's balance sheet and therefore these intangibles are not impaired.  The Payments CGU was assessed using discount cashflows and again no impairment was needed.
·	We assessed our other intangibles and goodwill for impairment and deemed that no impairment exists at 31 December 2021.

Going concern (including consideration of COVID-19)

In carrying out the going concern assessment, the Directors considered a number of scenarios, taking account of the possible continued impact of the COVID-19 pandemic in relation to revenue forecasts for the next 12 months from March 2022. Given current pandemic and macro-economic uncertainties, it is not yet fully clear when the global economic activity will fully return to pre pandemic levels, therefore, we continue to prepare the business for varying levels of performance.  To that end, we have continued to model the effects of differing levels of sales performance along with the measures we can take to ensure that the Group remains within its available working capital.

In reaching their going concern assessment, the Directors have considered the foreseeable future, a period extending at least 12 months from the date of approval of this interim financial report. This assessment has included the year end cash balances in excess of $62 million at year end and the net proceeds from the disposal of Boku Identity in February 2022, consideration of the forecast performance of the business and the financing facilities available to the Group. Considering this analysis, the Directors are satisfied that the Group has sufficient working capital resources over the period of at least 12 months from the date of approval of the consolidated financial statements.  As such, the consolidated financial statements have been prepared on a going concern basis.

Impact of Russia/Ukraine conflict

 

Boku is an international company providing payments services to global digital merchants such as Apple, Sony, Spotify, Google, Netflix and Amazon in over 90 countries.In 2021, total revenues from Russia/Ukraine/ Belarus were approximately 1% of Payments revenues.

Boku helps its merchants accept payments from consumers for their services in Russia and Ukraine, however:

·	Boku does not have any relationships with merchants domiciled in Russia, Belarus or the Ukraine.
·	Boku does not send any money to Russia nor has any active bank accounts domiciled in Russia
·	Boku does not have any employees or infrastructure in in Russia, Belarus or the Ukraine and has not seen any disruptions to its operations as a result of the conflict
·	Boku does have connections to Russian carriers almost all of which have stopped processing and are unlikely to resume in 2022. Assuming that is the case the revenue impact for the remainder of 2022 is not expected to be more than $1.5 million.

Looking Ahead

The divestment of our Identity business will enable Boku to focus on its core Payments business and to invest to fully exploit the Big Pond opportunity by continuing to build out the Boku 'mobile first' (M1ST) payments network.  As flagged in our interim report, we expect Adjusted operational expenditure in the Payments division to increase more quickly in 2022 as we invest in sales and marketing as well as technology and operational headcount but we also expect this to flatten again in FY23 and beyond after this one-time investment.

We are pleased with the 2021 financial results and believe the company is well positioned for 2022 as a pure play payments company to exploit the substantial opportunities it has.

 

Keith Butcher

Chief Financial Officer

28 March 2022

 

Strategic Report - In the Beginning…

Steve Jobs famously understood the value of making complex things simple. He is quoted as saying: "That's been one of my mantras-focus and simplicity. Simple can be harder than complex: You have to work hard to get your thinking clean to make it simple. But it's worth it in the end because once you get there, you can move mountains."

He charged his designers to study Picasso's picture of The Bull to see how the complex can be stripped down to its essentials. For him, everything had to be reduced to its essence. We can see that influence in the design of Apple's consumer products. It is also a philosophy - focus and simplicity - that informs Boku's approach.

Simplicity

In 2017 when Boku listed its shares on AIM, we referred to ourselves as a direct carrier billing ('DCB') company, expanding more broadly into carrier commerce. We understood that the value in our company was not so much in the code on our platform, but rather in the network that we assembled.

Harnessing the collective capabilities of the world's mobile network operators is hard. Each uses its own non-standardised technology and connecting for a merchant one-by-one would be complex, time-consuming and, for all practical purposes, commercially unsustainable. Imposing a single standard across this global network of non-standardised carrier billing payments connections was simply too complex and never going to happen. Our mission therefore was to simplify; to provide a solution in which merchants would integrate once and gain access to many mobile operators.

We developed and refined our ability to engage with mobile network operators and make them seem like regular payment methods to our large merchants. We simplified.

But, more than that, we took things down to their essence. We became successful because we focused on the merchant's requirements. We didn't simply take the capabilities that the mobile network operators offered. Instead, we worked closely with our merchants, developing the standards they required from payment methods. We worked tirelessly with our mobile operator partners to ensure that they met the needs of merchants, not the other way around.

Simplifying is not simple.

The flywheel, the scale player

The 'light bulb' moment was the realisation that the unique benefit of DCB was not primarily about moving money, rather it was the ability to acquire new users with a single tap on a mobile phone - which then charged purchases to the phone bill. Since mobile operator partners already knew the phone numbers of billions of their subscribers, we could uniquely streamline customer onboarding. To merchants, the value of DCB is as a highly effective customer acquisition tool.

Once Boku had proven the unique value and capabilities of carrier billing, a flywheel started to spin. Our payments network grew as operators wanted to accept payments on behalf of our merchants, and our growing payments network began to attract more and larger global merchants.

And so the flywheel turned.

The more it turned, the network effects we had created made it more difficult for others to compete with Boku, and within a few years, we had become the scale player in carrier billing as most of the world's largest digital merchants used Boku for DCB, largely on an exclusive basis. In platform businesses, the scale player has considerable advantages. With the incremental cost of processing a transaction essentially zero, the platform with the largest transaction volumes can simultaneously be the lowest-cost player, whilst carrying the expense base that allows them to develop features that their competitors are not able to replicate.

Boku has established itself as the world's leading DCB company. We process, mostly on an exclusive basis, mobile payments for all of the world's largest digital entertainment companies: Amazon, Apple, Epic Games, Meta Platforms (Facebook), Microsoft, Google, Sony, Spotify, Netflix, Tencent, Activision Blizzard.

However, we haven't stopped there.

"Growth is the only evidence of life" - Cardinal Newman

We had a good runway of growth in front of us. Due to the complexity of deploying sophisticated carrier billing connections, it had not proved possible to immediately switch on all networks for all merchants. Rather, this must be scheduled with both the carrier and merchant. A steady roll out has delivered double digit revenue growth rates and much faster EBITDA growth for the past five years and, with the average merchant using only 10% of the network, there is plenty of growth still to come.

But on the horizon, there was a cloud no bigger than a man's hand. It's an unavoidable reality that direct carrier billing is a niche payment instrument.

An unparalleled user acquisition tool DCB may be, but the majority of people who buy digital entertainment products and services are not going to charge it to their phone bill. Saturation for carrier billing as a payment method comes, it seems, at about 15%: the other 85% is paid for by other means.

Moreover while, DCB works well in the digital entertainment industry, it is ill suited to other sectors. Consumers don't really want to charge types of product or service to their phone bill. Digital entertainment is a big and growing market, but it only accounts for about 5% of online spending. Our Total Addressable Market was limited.

If we wanted to grow faster, we needed to find new markets. It was not enough for us to be the big fish in a small pond. We wanted to swim in the Big Pond.

Which pond?

We contemplated two approaches. We could either utilise our carrier network and find new uses for our carrier connections, or we could find new payment products to grab a larger share of our existing merchants' sales.

So double down on our suppliers or our customers? That was the choice. In fact, as we drew up our plans, we realised that we didn't have to choose; we could do both.

Carrier Commerce

Boku Identity resulted from a desire to address a large and growing market - the verification of mobile transactions, using mobile network operator capabilities. Very often when undertaking a mobile transaction, the provider will want to know the phone number of the device with which they are interacting or its registered owner. Who better to ask than mobile network operators themselves?

In 2019, Boku bought Danal for $25.1 million to kick start our entry into this industry, renaming it 'Boku Identity'. Despite setbacks in 2020 when we suffered an interruption to our carrier connectivity in the critical US market, we stuck to our guns, built out new connections in Europe and Asia, and added new customers. The business bounced back in 2021, posting revenue growth of 37%. We had found a formula, but to develop things further needed significantly more investment.

New Payment Methods for our Merchants

The second strand of our growth plan was to integrate new payment methods into our network, selling them to our existing merchants. One route for growth was from expansion in the direct carrier billing segment. In 2020, we acquired Fortumo, cementing our position as the DCB market leader. But there's only so much consolidation that can be done in DCB.

Boku's core competence has been in simplifying the complex. In taking the disparate set of different mobile network operator platforms and integrating them in such a way that a merchant can connect to us once and get access to the whole suite of them, without having to worry about the underlying differences.

In the world of payment cards, standardisation has been around for years, driven by the card schemes. There is in fact an international standard - ISO 8583 -- which defines how card payments are processed. Switching costs are low, leading to the emergence of super high-volume commoditised processors, competing on price. We ran a mile from this part of the payment processing business. Therefore, in order to grow faster, we sought out other payment types that were similarly unstandardised, yet which were popular - and in eWallets we found them.

Payments are in a period of significant change. Whilst in the West, credit and debit cards have long been the dominant means of payment, in the newly developed markets of Asia, the Middle East, Africa and Latin America, the card habit tended to be confined to old money. In those places, spending with cards was not the reflex for most merchants or consumers. For sure, as they got richer, people got bank accounts, but when it came to buying online, entrepreneurial companies sprang up to provide them with modern tools based around the mobile phone.

This mobile device knows where you are, can see, can authenticate you, and provide simple ways of displaying and analysing your spending. It was a no-brainer. Freed from the constraints of a rectangular piece of plastic, eWallets provide better ways of paying and have become enormously popular, particularly in Asia, to the extent that most of the world's eCommerce now takes place using them (albeit with a significant skew to China).

Boku started integrating eWallets in Indonesia and started to sell them to our customers. We found that the uptake was good, which encouraged us to invest further. Merchants who had previously just used us as a specialist Direct Carrier Billing company were prepared to see us as a Local Payment Method company ('LPM').

Boku has continued to invest in growing its network, now styled as our Mobile-First Payment Network, or 'M1ST', to such an extent, that it now reaches seven billion end-user accounts in 91 countries. Approximately 3 billion of these end-user accounts are from the new payment methods. eWallets and Real-Time Payments are no longer a minor part of Boku's business -- more than 1.1 million monthly active users paid with eWallets or Real-Time Payments in December 2021 - a figure that grew nine-fold during the year. The Big Pond is a lot bigger: According to eMarketer, global eCommerce in 2021 totaled $4.89 trillion. This compares with estimates of the digital entertainment industry, for which DCB is best suited, of approximately $300 billion.

Boku's competitive strengths

Given its size, it's not surprising that the Big Pond is full of big fish. Generalist payment processors like Worldpay and Adyen along with specialist players like dLocal and Rapyd. Companies with valuations many times Boku's. Companies with larger headcounts. So how does Boku compete?

It's the same formula. Build a good product, focus on the customer, help them to improve their business and you can grow. It's not the big that beat the small, it's the fast that beat the slow.

Boku focuses on building out wider coverage and stronger product features to compete, and this takes investment. We also continuously improve our platform: with an immediate focus on settlement capabilities, resellers, and improving the onboarding experience. We need to expand and support our network of licences - Boku has already extended its capabilities to process regulated payments into 50 countries, with licences in the UK, Ireland (passported across the EEA), Singapore, Hong Kong, and with applications and partnerships in several other countries.

Sale of Identity and focus on Payments

During 2021 it became clear that both of our new business lines needed investment. We had a winning formula in Identity, but we needed more coverage to help us grow. We had a winning formula in Payments, but that part of the business too needed investment.

Back in 2019 we didn't have to choose. Now we do.  

We chose to focus all our efforts on the Payments business, where we have a proven track record and are aiming at a larger total addressable market.

While there was no committed plan to sell in 2021, we sold our Identity business to Twilio after the period close in February 2022 - details of this transaction are described elsewhere in the report. Twilio will be able to give Boku Identity the investment and attention that it needs.

Boku, therefore, enters 2022 as a pure-play payments business. We will focus on Boku and Fortumo as one integrated, cohesive, payments unit ready to grow its business in mainstream payment methods. The main planks of our strategy are as follows.

·	We will expand the M1ST network to encompass the leading Local Payment Methods like eWallets in the countries where the new middle class resides.
·	We will build the highest quality connections enabling merchants to sell more stuff. Our products will be expanded beyond the requirements of the digital entertainment industry, also to embrace other merchant sectors, including digital advertising, software, travel, and general ecommerce.
·	We will enhance our regulated payment and settlement capability to allow us to help our merchants not only to process transactions, but also get settled in the currency of their choice with the frequency and speed they wish.

Our competitive advantage stems from three areas

1.     We will maintain our reputation amongst the world's largest merchants for flawless execution and merchant-centric solutions. There are practically no other companies on earth who have been able to simultaneously support Amazon, Apple, Google, Microsoft, Netflix, Spotify, Facebook, and Tencent amongst others. This reputation is hard-won and will be defended. Looking after our customers helps us get more of their business and helps us win more customers too.

 

2.     As well as supporting the biggest Local Payment Methods, we will also ensure that we have unique capabilities. This might be licenses that none of our competitors have, or connectors giving us more coverage, but we will ensure that there are some things that you can get from Boku that you won't be able to get from anyone else.

 

3.     We will differentiate our product by producing features that help our merchant sell more. Most payment companies are interested in processing more and more volume, we obsess about helping our customers to acquire and retain users. This leads us to develop features that are more to do with marketing - optimisation of the enrolment process, prompts to users to renew if a payment fails, integrations directly into our merchants and suppliers marketing, and point of sale systems to allow bundled offers between the two to drive growth. Other payment companies don't do this. Our bundling product drives new user adoption for digital subscription services, from music and video streaming to dating apps and beyond.

 

The future for Boku is exciting. A future where we continue the transition from being the leading player of a niche payment method, DCB, to providing mainstream payments to mainstream merchants.  A future where we swim in the Big Pond.

 

FINANCIAL STATEMENTS

BOKU, INC.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

			Year ended 31 December	Year ended 31 December
			2021	2020
	Note		$'000	$'000
Revenue	4		69,165	56,402
Cost of sales			(5,733)	(4,925)
Gross profit			63,432	51,477
Other Income (non-recurring)*			1,080	-
Administrative expenses	5		(59,377)	(68,200)
Operating profit/(loss) analysed as:
Adjusted EBITDA**			20,028	15,268
Other Income (non-recurring)	4		1,080	-
Depreciation and amortisation			(7,487)	(5,917)
Stock Option expense	20		(7,391)	(4,925)
Foreign exchange (losses)/gains			(134)	1,048
Impairment of goodwill	11		-	(20,775)
Exceptional items (included in administrative expenses)	5		(961)	(1,422)
Operating profit/(loss)			5,135	(16,723)
Finance income	7		22	70
Finance expense	7		(770)	(662)
Profit/(loss) before tax			4,387	(17,315)
Tax credit/(expense)	8		1,882	(1,470)
Net profit/(loss) for the period attributable to equity holders of the parent company			6,269	(18,785)
Other comprehensive income/(losses) net of tax Items that will or may be reclassified to profit or loss
Foreign currency translation (loss)/profit			(2,407)	1,720
Total comprehensive (loss)/profit for the period			(2,407)	1,720
Total comprehensive profit/(loss) for the period attributable to equity holders of the parent company			3,862	(17,065)
Profit/(loss) per share attributable to the owners of the parent during the year
Basic EPS and	9		0.0213	(0.069)
Fully diluted EPS ($)			0.0206	(0.069)

* Other Income in 2021 relates to the acquisition of Fortumo and is the difference between the expected fair value of the Fortumo earnout escrow amount as at 31^st December 2020 and the actual amount paid to Fortumo shareholders in September 2021; to better reflect underlying performance, this non-recurring income is excluded from Adjusted EBITDA. Further information on this non-recurring Payment Income is detailed in Note 4.

**Earnings before interest, tax, depreciation, amortisation, non-recurring other income, stock option expense, foreign exchange gains/(losses), impairment of goodwill and exceptional items. Management has assessed this performance measure as relevant for the user of the accounts.

 

BOKU, INC.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

 

			31 December	31 December
			2021	2020
	Note		$'000	$'000
Non-current assets
Property, plant and equipment	10		5,670	3,771
Intangible assets	11		63,117	65,559
Deferred tax assets	8		3,105	483
Total non-current assets			71,892	69,813
Current assets
Trade and other receivables	13		82,557	92,535
Cash and cash equivalents - unrestricted	14		56,651	61,290
Cash and cash equivalents - Restricted cash	14		5,789	1,414
Total current assets			144,997	155,239
Total assets			216,889	225,052
Current liabilities
Trade and other payables	16		119,641	136,779
Bank loans and overdrafts	17		1,125	1,438
Lease liabilities	15		1,335	1,436
Total current liabilities			122,101	139,653
Non-current liabilities
Other payables	16		1,700	862
Deferred tax liabilities	8		456	228
Loans and borrowings	17		6,688	10,813
Lease liabilities	15		3,498	1,742
Total non-current liabilities			12,342	13,645
Total liabilities			134,443	153,298
Net assets			82,446	71,754

 

Equity attributable to equity holders of the company
Share capital	18		29	29
Share premium			246,883	240,053
Foreign exchange reserve			(2,714)	(307)
Retained losses			(161,752)	(168,021)
Total equity			82,446	71,754

 

 

BOKU, INC. 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

 

	Share capital	Share premium	Foreign exchange reserve	Retained losses	Total
	$'000	$'000	$'000	$'000	$'000
Equity as at 1 January 2020	25	208,196	(2,027)	(149,236)	56,958
Loss for the year	-	-	-	(18,785)	(18,785)
Other comprehensive income	-	-	1,720	-	1,720
Issue of share capital upon exercise of 8,906,542 stock options and RSUs	-	1,700	(32)	-	1,668
Share-based payment1	-	4,313		-	4,313
Shares issued	3	25,159	32	-	25,194
Issue of RSU's related to Fortumo acquisition	-	1,340	-	-	1,340
Share issue costs	-	(654)			(654)
Other reserves	-	(2,447)			(2,447)
Share issued for warrant	1	2,446			2,447
Equity as at 31 December 2020	29	240,053	(307)	(168,021)	71,754
Profit for the year	-	-	-	6,269	6,269
Other comprehensive income/(loss)	-	-	(2,407)	-	(2,407)
Issue of share capital upon exercise of 6,751,318 stock options and RSUs	-	1,146	(37)	-	1,109
Share-based payment1	-	5,434	-	-	5,434
Issue of RSU's related to Fortumo acquisition	-	250	37	-	287
Equity as at 31 December 2021	29	246,883	(2,714)	(161,752)	82,446

 

¹ Share based expense has been credited against share premium in accordance with the local company law and practice in US.

 

BOKU, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS

			Year ended 31 December	Year ended 31 December restated
			2021	2020
	Note		$'000	$'000
Cash generated from operations	22		12,362	31,529
Income taxes paid			(443)	(269)
Net cash from operating activities			11,919	31,260
Investing activities
Purchase of property, plant and equipment			(812)	(489)
Purchase of internally developed software			(5,022)	(2,920)
Purchased financial asset			-	(2,160)
Investment in subsidiary, net of cash acquired			-	(34,435)
Interest received			22	70
Net cash used in investing activities			(5,812)	(39,934)
Financing activities
Payment of principal to lease creditors			(1,694)	(2,045)
Payment of interest to lease creditors			(235)	(292)
Issue of common stock to employees			1,109	1,700
Issue of new ordinary shares			-	25,129
Share issue costs			-	(654)
Settlement of loan by shareholder			-	793
Interest paid on borrowings			(409)	(307)
Proceeds from bank loan			-	20,000
Repayment of bank loan			(4,563)	(7,313)
Borrowing costs			-	(500)
Repayment of bank facility			-	(2,092)
Net cash (used in)/from financing activities			(5,792)	34,419
Net increase in cash and cash equivalents			315	25,745

 

Effect of foreign currency translation on cash and cash equivalent			(579)	1,336
Cash and cash equivalents at beginning of period			62,704	35,623
Cash and cash equivalents at end of period	14		62,440	62,704

 

BOKU, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

1.   Corporate Information

The consolidated financial information represents the results of Boku Inc. ("the Company") and its subsidiaries (together referred to as "the Group").

Boku Inc. is a company incorporated and domiciled in the United States of America. The registered office of the Company is located at 735 Battery St., 2nd Floor, and San Francisco, CA 94111, United States.

 The principal business of the Group is the provision of mobile billing and payment solutions for mobile network operators and merchants. These solutions enable consumers to make online payments using their mobile devices.

The financial information set out in this document does not constitute the Group's full annual Report and financial statements for the year ended 31 December 2021 or 31 December 2020. The annual report and financial statements for the year ended 31 December 2021 were approved by the Board of Directors on 28 March 2022, along with this preliminary announcement. The financial statements for the year ended 31 December 2020 have been reported on by the Independent Auditor. The Independent Auditor's report on the financial statements for the year ended 2020 was unqualified and did not draw attention to any matters by way of emphasis. The Annual Report for the year ended 31 December 2021 will be made available in due course on the Company's website: https://www.boku.com/investor-relations/ 

 

2.   Accounting policies

 

The financial information has been prepared using the historical cost convention, as stated in the accounting policies below. These policies have been consistently applied to all periods presented, unless otherwise stated.

Basis of preparation

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (IASB) ("IFRS") and IFRIC Interpretations issued by the International Accounting Standards Board (IASB). 

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed below in II, "Critical accounting estimates, assumptions and judgements". The accounting policies adopted in these results have been consistently applied to all the years presented and are consistent with the policies used in the preparation of the financial statements for the year ended 31 December 2020, except for those that relate to new standards and interpretations effective for the first time for periods beginning on (or after) 1 January 2020. There are deemed to be no new standards, amendments and interpretations to existing standards, which have been adopted by the Group, that have had a material impact on the financial statements

The principal accounting policies adopted by the Group in the preparation of the Consolidated financial statements are set out below.

The presentation currency of the consolidated financial statements is US Dollars, rounded to the nearest thousands ($'000) unless otherwise indicated. The main functional currencies for the Company's subsidiaries are the United States Dollar, Euro and Great Britain Pound

Going concern

The consolidated financial statements have been prepared on a going concern basis. The ability of the Group to continue as a going concern is contingent on the ongoing viability of the Group. The Group meets its day-to-day working capital requirements through its cash balances and also has a bank facility that it can use. The current economic conditions continue to create uncertainty, particularly over (a) the level of consumer engagement; and (b) the level of new sales to new customers. The Group's forecasts and projections, taking account of reasonably possible changes in trading performance, show that the Group expects to be able to operate within the level of its current cash resources and bank facilities. Further information on the Group's borrowings and available facilities is given in Note 17 to these consolidated financial statements.

 

The directors have prepared cash-flow forecasts covering a period of at least 12 months from the date of approval of the financial statements which foresee that the Group will be able to operate within its existing facilities.

 

The Covid-19 pandemic continued to have limited impact on Boku's business in 2021, indeed the Payments business saw increased processed volumes in covid impacted countries and regions, and therefore the Board believes that the business is able to navigate through the continued impact of Covid-19 due to the strength of its customer proposition and business partnerships, statement of financial position and the strong net cash position of the Group (cash balances of $61.4 million at year end with further cash receipts from the disposal of the identity business on 28 February 2022).

 

The ongoing Russia/Ukraine conflict is not expected to have a material impact on Group revenues in 2022 as detailed in the CEO and CFO reports.

 

Having assessed the principal risks and the other matters discussed in connection with the going concern statement, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future.  For these reasons, they continue to adopt the going concern basis of accounting and deem there to be no emphasis over going concern, in preparing the financial information.

Basis of consolidation

Where the Company has control over an investee, it is classified as a subsidiary. The Company controls an investee if all three of the following elements are present: power over the investee, exposure to variable returns from the investee, and the ability of the investor to use its power to affect those variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control.

The consolidated financial information presents the results of the Company and its subsidiaries ("the Group") as if they formed a single entity. Intercompany transactions and balances between group companies are therefore eliminated in full.

 

The consolidated financial information incorporates the results of business combinations using the acquisition method. In the statement of financial position, the acquiree's identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. The results of acquired operations are included in the consolidated statement of comprehensive income from the date on which control is obtained. They are deconsolidated from the date on which control ceases. The excess of the cost of acquisition over the fair value of the Group's share of the identifiable net assets acquired is recorded as goodwill.

 

A list of the subsidiary undertakings is given in Note 12 of the financial information.

Changes in accounting policies and disclosures

(a) New and amended standards adopted by the Group

 

The accounting policies adopted in these consolidated financial statements are consistent with those of the annual financial statements for the 12 months ended 31 December 2020. The IABS issued the following new and updated standards for annual reporting periods beginning on or after 1st January 2021. The Group adopted the amendments to the following existing standards during 2021:

 

	Amendments to Existing Standards	IASB effective date
1	Interest Rate Benchmark Reform - Phase 2 (Amendments to IFRS 9, IAS39, IFRS,&, IFRS 4and IFRS 16)	01-Jan-21
2	Amendments to IFRS 4  Insurance Contracts	01-Jan-21
3	Covid-19 Related Rent concessions beyond 30 June 2021	01-Apr-21

 

1)    Interest rate benchmark reform - Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16)

 

The Phase 2 amendments address issues that might affect financial reporting during the reform of an interest rate benchmark, including the effects of changes to contractual cash flows or hedging relationships arising from the replacement of an interest rate benchmark with an alternative benchmark rate.

 

Major changes:
(i) Added a practical expedient that enables a company to account for a change in the contractual cash flows that are required by the reform by updating the effective interest rate to reflect, for example, the change in an interest rate benchmark from LIBOR to an alternative benchmark rate, i.e., apply IFRS 9:B5.4.5 rather than IFRS 9:B5.4.6, and
(ii) Provide relief from specific hedge accounting requirements.

 

There is no impact on the Group Financial Statements for the 12 months ending 31^st December 2021 as a result of this standard.

 

2)    Amendments to IFRS 4 - Insurance Contracts (deferral of IFRS 9)

The Amendments made to IFRS 4 related to companies providing insurance. The Group does not provide insurance services so this standard has no current or future impact on the Group financial statements.

The amendment is effective for periods beginning on or after 1 January 2021.

3)    Covid-19 Related rent concessions beyond 30 June 2021 (Amendments to IFRS 16)

In March 2021, IASB issued an amendment to IFRS 16 which extended the COVID-19 related rent concessions beyond 30 June 2021. This amendment is required to be mandatorily adopted by a lessee who had elected to apply the original practical expedient. The Group did not benefit from any rent concessions during the twelve months ending 31 December 2021.

The amendment is effective for periods beginning on or after 1^st April 2021.

 

(b) New and amended standards published, but not yet applicable for the annual period beginning on 1^st January 2021, not yet adopted by the Group :

 

1)	Amendments to IAS 16 Property, Plant and Equipment: Proceeds before Intended Use (applicable for annual periods beginning on or after 1 January 2022)
2)	Amendments to IAS 37 Provisions, Contingent Liabilities and Contingent Assets: Onerous Contracts - Cost of Fulfilling a Contract (applicable for annual periods beginning on or after 1 January 2022)
3)	Amendments to IFRS 3 Business Combinations: Reference to the Conceptual Framework (applicable for annual periods beginning on or after 1 January 2022)
4)	Annual Improvements to IFRS Standards 2018-2020 (applicable for annual periods beginning on or after 1 January 2022)
5)	IFRS 17 Insurance Contracts (applicable for annual periods beginning on or after 1 January 2023). This standard will have no impact on the future Group financial statements as the group does not issue Insurance contracts.
6)	Amendments to IAS 1 Presentation of Financial Statements: Classification of Liabilities as Current or Non-current (applicable for annual periods beginning on or after 1 January 2023, but not yet endorsed in the EU)
7)	Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2: Disclosure of Accounting Policies (applicable for annual periods beginning on or after 1 January 2023, but not yet endorsed in the EU)
8)	Amendments to IAS12 Income taxes: require companies to recognise deferred tax on transactions that, on initial recognition, give rise  to equal amounts of taxable and deductible temporary differences. The amendments are effective for annual reporting periods beginning on or after 1 January 2023.

 

Management continues to monitor the issuance of new standards and any further amendments to the existing standards and considers that the application of the new amendments in the table above will not materially affect the Group after adoption.

Foreign currency translation

The presentation and functional currency for the group is US dollars.  Items included in the financial statement of each of the Group's entities are measured in the functional currency of each entity.

Foreign currency transactions and balances

i)	Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions.
ii)	Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at the reporting period end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement within administrative expenses.
iii)	Non-monetary items that are measured in terms of historical costs in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Any goodwill arising on the acquisition of a foreign operation and any fair value adjustments (including purchased intangible assets) to the carrying amounts of assets and liabilities arising on the acquisition are treated as assets and liabilities of the foreign operation and translated at the closing rate.

 

Consolidation of foreign entities

On consolidation, the results and financial position of all the Group entities that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

i)	Assets and liabilities for each Consolidated statement of financial position presented are translated at the closing rate at the date of that Consolidated statement of financial position.
ii)	Income and expenses for each Consolidated statement of comprehensive income item are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions); and
iii)	All resulting exchange differences are recognised as a separate component of equity.

 

Exchange differences are recycled to profit or loss as a reclassification adjustment upon disposal of the foreign operation.

Revenue

Boku recognises revenue in accordance with IFRS 15 Revenue from Contracts with Customers by applying the required five steps: identify the contract(s) with a customer, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to the performance obligations in the contract and recognise revenue when (or as) the entity satisfies a performance obligation. Revenue is allocated to the various performance obligations on a relative stand-alone selling price ("SSP") basis.

An analysis of the key considerations that IFRS 15 has on the Group's revenue streams is summarised below.

1. Payments Segment revenue

Boku's technology for the Payments segment delivers a low friction way for mobile phone users to buy things and charge them to their phone bill or pre-paid phone or wallet balance. The Group's revenue is principally its service fees which are earned from its merchants.

(i) Settlement Model: when it acts as an agent between a merchant and mobile network operators (MNOs), or an aggregator (a middleman between the Group and the MNO) or an eWallet provider. Management has determined that it is acting as an agent under IFRS 15 because it does not have the primary responsibility for providing the services to the customer. Therefore, there has been no change in the classification as an agent from the previous assessment. Fees are calculated as a percentage of the value of transaction.  An additional fee is also earned when a merchant requires settlement in a different currency than the currency received, at contractual agreed rates, in line with IFRS 15.

(ii) Transactional Model: from larger virtual and digital merchants who receive the sale collections directly and pay a service fee to the Group.

Under both the transactional and settlement model (see point (i) and (ii) above), the Group's contracts with customers include one performance obligation only. This relates to an obligation to facilitate the payment for the transaction between the merchant and their end users. Under IFRS 15 revenues for this service is recognised under this contract at a point in time as the obligation is fulfilled at time when transaction happens, as the point of delivery of the performance obligation is the same as when the risks and rewards have been transferred. Payments are due once the Group receives the statement of information from the Aggregator or the MNO or wallet provider.

(iii)) Other revenue: from special merchant integrations, subscription services and early settlement of funds.

In 2020, Special merchant integrations were recognised in full once the integrations were successfully tested and approved by the customer. Maintenance arrangements were negotiated separately and fees were paid monthly and were recognised in full at each month end, in line with IFRS 15.  In 2021 the pricing model was changed from this fixed fee plus monthly maintenance fees model, to charging a percentage of the a value of the transaction volumes processed for that merchant.

Contract assets and contract liabilities are included within 'trade and other receivables' and 'trade and other payables' respectively on the face of the statement of financial position.The group recognises all revenue initally as accrued income/contract asset, until the reports from carriers are received at which points these contract assets are recognised as debtors/receivables.

The Group's revenue is principally its service fees earned from its merchants. There are slight differences to contracts depending on the services provided. All revenue from the Payment segment is recognised at one point in time. Therefore, for the Payments segment, at 31 December 2020 and 31 December 2021, the Group does not have deferred revenue on the balance sheet.

2.   Identity Segment Revenue

Boku's technology for the Identity segment provides identity services to customers by silently validating a mobile device using automatic mobile number verification, streamlining the Know Your Client ('KYC') processes by validating the name and address entered by a user against the MNOs data, and reduce fraud on marketing promotions by linking marketing promotions to secure SIM based user identities instead of email or unverified mobile numbers etc.

Identity merchants are charged either on a per user basis - for monitoring - or a per transaction basis, typically with monthly minimums.

For the Identity segment, deferred revenue consists of billings processed in advance of revenue recognition generated by Boku Identity's Mobile Identification/TCPA services. For these services, Boku bills its customers at the beginning of the contract term as a pre-payment for services which are billed at a set price per transaction. The revenue is recognised monthly, at a point in time, based on the amount of transactional volume processed during the month and services will continue to be performed until the full value of the contract is realised. For the period ended 31 December 2021, deferred revenue on the balance sheet for the Identity Segment was $303,853  (2020: $443,585 ).

Cost of sales

Cost of sales is primarily related to the monthly fees and service charges from MNOs and other providers, customer services fees, some marketing expenses and bad debt.

Operating Segments

In accordance with IFRS 8, "Operating Segments", the Group has derived the information for its segmental reporting using the information used by the Chief Operating Decision Maker ("CODM"), defined as the General Management Committee (GMC). The segmental reporting is consistent with those used in internal management reporting and the measure used by the GMC is Adjusted EBITDA.

The Board considers that the Group's provision of a payment platform for the payment processing of virtual goods and digital goods purchases constitutes one operating and one reporting segment (Payments segment), and the provision of identity services another operating and reporting segment (Identity segment) as defined under IFRS 8. Management reviews the performance of the Group by reference to total results against budget as well as for each of the two operating segments.

Exceptional Items

Exceptional items are those significant items, which are separately disclosed by virtue of their size, nature or incidence to enable a full understanding of the Group's financial performance. In setting the policy for exceptional items, judgement is required to determine what the Group defines as "exceptional". The Group considers an item to be exceptional in nature if it is non-recurring or does not reflect the underlying performance of the business. Exceptional items are recorded separately below Adjusted EBITDA.

Management of the Group evaluates Group strategic projects such as acquisitions, divestitures and integration activities, Group restructuring and other one-off events such as restructuring programmes. In determining whether an event or transaction is exceptional, management of the Group considers quantitative and qualitative factors such as its expected size, precedent for similar items and the commercial context for the particular transaction, while ensuring consistent treatment between favourable and unfavourable transactions impacting revenue, income and expense. Examples of transactions which may be considered of an exceptional nature include major restructuring programmes, cost of acquisitions, the cost of integrating acquired businesses or gains or losses on the disposal of discontinued operations.

Retirement Benefits: Defined contribution schemes

The Group operates various pension schemes in various jurisdictions, all being defined contribution schemes (pension plans). A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity. The Group has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods.

For defined contribution plans, the Group pays contributions to publicly or privately administered pension insurance plans on a mandatory, contractual or voluntary basis. The Group has no further payment obligations once the contributions have been paid. The contributions are recognised as an employee benefit expense when they are due.

 

In the U.S. the group has a 401(k) plan, a type of defined contribution scheme in the United States in which all employees can participate after meeting eligibility requirements. Participants may elect to have a portion of their salary deferred and contributed to the scheme up to the limit allowed by applicable income tax regulations. The Company has made a matching contribution to the scheme for the years ended 31 December 2021 and 31 December 2020.

Contributions to defined contribution schemes are charged to the consolidated statement of comprehensive income in the year to which they relate.

Share-based payments

Where equity settled share options and Restricted Stock Units ('RSUs') are awarded to employees, the fair value of the options or RSUs at the date of grant is charged to the consolidated statement of comprehensive income over the vesting period. Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each reporting date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options or RSUs that eventually vest.

Where the terms and conditions of options or RSUs are modified before they vest, the increase in the fair value of the options, measured immediately before and after the modification, is also charged to the consolidated statement of comprehensive income over the remaining vesting period.

Where equity instruments are granted to persons other than employees, the consolidated statement of comprehensive income is charged with the fair value of goods and services received.

Where options are cancelled within the vesting period, the remaining cost of the options is accelerated and charged to the income statement in the year. The value of share-based payment is taken directly to reserves and the charge for the period is recorded in the income statement.

The Group's scheme, which awards shares in the parent entity, includes recipients who are employees in subsidiaries. In the consolidated Financial Statements, the transaction is treated as an equity-settled share-based payment, as the subsidiary has received services in consideration for Boku Inc's equity instruments. An expense is recognised in the consolidated Group income statement for the fair value of share-based payment over the vesting year, with a credit recognised in equity. In the subsidiaries' financial statements, the awards, in proportion to the recipients who are employees in said subsidiary, are treated as an equity-settled share-based payment, as the subsidiaries do not have an obligation to settle the award. An expense for the grant date fair value of the award is recognised over the vesting period, with a credit recognised in equity. The credit is treated as a capital contribution, as the parent company is compensating the subsidiaries' employees with no cost to the subsidiaries as there is no expectation to recharge the cost. In the parent company's financial statements, there is no share-based payment charge where the recipients are employed by a subsidiary, with the parent company recognising an increase in the investment in the subsidiaries as a capital contribution from the parent and a credit to equity. There are no cash settled share-based payments allowed under the scheme, but if they were they will be recognised as an expense in the income statement with a corresponding credit to liabilities.

RSU's issued in connection with business combinations as replacements for instruments held by employees are treated as part of the consideration transferred to the extent that the Company is obliged to issue the replacement awards and that they compensate for service that has been provided pre-combination. To the extent awards are voluntary or that they relate to the provision of future services they are treated as a post-combination expense.

Share options and RSUs which will incur future employer payroll taxes on exercise, are accrued for the future cost of Employer's National Insurance from the point the options are granted over their vesting period. This liability is then amended at each subsequent balance sheet date under IFRS 2.
 

Intangible assets

(i)            Goodwill

 

The Group uses the acquisition method of accounting for the acquisition of a subsidiary. The consideration transferred is measured at the fair value of the assets given, equity instruments issued, and liabilities incurred or assumed at the date of exchange. Costs directly attributable to the acquisition are expensed in the period.  Identifiable assets acquired, liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. 

In respect of business combinations that have occurred since January 2014, goodwill represents the excess of the cost of the acquisition and the Group's interest fair value of net identifiable assets and liabilities acquired.  In respect of business combinations prior to this date, goodwill is included on the basis of its deemed cost, which represents the amount recorded under US GAAP. As permitted by IFRS 1, Goodwill arising on acquisitions prior to 1 January 2014 is stated in accordance with US GAAP and has not been remeasured on transition to IFRS.   Goodwill is recognised and measured at the acquisition date.

Goodwill is capitalised as an intangible asset at cost less any accumulated impairment losses.  Any impairment in carrying value is being charged to the consolidated statement of comprehensive income.  An impairment loss recognised for goodwill is not reversed.

Where the fair value of identifiable assets, liabilities and contingent liabilities exceed the fair value of consideration paid, the excess is credited in full to the consolidated statement of comprehensive income on the acquisition date.

Goodwill is allocated to appropriate cash generating units (CGUs).  Goodwill is not amortised but is tested annually for impairment or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.  The recoverable amount is determined based on value in use calculations. The use of this method requires the estimation of future cash flows and the determination of a discount rate in order to calculate the present value of the cash flows. The major assumptions are disclosed in note 11.

(ii)           Intangible assets acquired as part of a business combination

Intangible assets acquired in a business combination are identified and recognised separately from goodwill where they satisfy the definition of an intangible asset. All intangible assets acquired through business combinations, are amortised over their useful lives.

Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost less accumulated amortisation and accumulated impairment losses.  The carrying values are tested for impairment when there is an indication that the value of the assets might be impaired.

(iii)          Research and development

Expenditure on research activities as defined in IFRS is recognised in the income statement as an expense as incurred.

Expenditure on internally developed software products and substantial enhancements to existing software product is recognised as intangible assets only when the following criteria are met:

1.	it is technically feasible to develop the product to be used or sold;
2.	there is an intention to complete and use or sell the product;
3.	the Group is able to use or sell the product;
4.	use or sale of the product will generate future economic benefits;
5.	adequate resources are available to complete the development; and
6.	expenditure on the development of the product can be measured reliably

The capitalised expenditure represents costs directly attributable to the development of the asset from the point at which the above criteria are met up to the point at which the product is ready to use. The costs include external direct costs of materials and services consumed in developing and obtaining internal-use computer software, and payroll and payroll-related costs for employees who are directly associated with and who devote time to developing the internal-use software.  If the qualifying conditions are not met, such development expenditure is recognised as an expense in the period in which it is incurred. Product development costs previously recognised as an expense are not recognised as an asset in a subsequent period.

(iv)          Amortisation rates

The significant intangibles recognised by the Group and their useful economic lives are as follows:

Intangible asset Tradenames Acquired intangibles (Fortumo acquisition) Merchant relationships Developed technologies Domain names Internally developed software

Useful economic life Indefinite life - not amortised 10 years 5 -10 years 5  years 10 years 3  years

The amortisation expense is recognised within administrative expenses in the consolidated statement of comprehensive income.

Property, plant and equipment

Property, plant and equipment are held under the cost model and are stated at historical cost less accumulated depreciation and any accumulated impairment losses. Historical cost includes expenditure that is directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management.

Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance expenditures are charged to the Consolidated statement of comprehensive income during the financial year in which they are incurred. Depreciation is calculated using the straight-line method to write off the cost of each asset to its residual value over its estimated useful life as follows:

Office equipment and furniture Computer equipment and software Leasehold improvement Right-of-use assets	3-5 years on cost 3  years on cost 3-5 years on cost Shorter of useful life of the asset or lease term

Gains and losses on disposals are determined by comparing the disposal proceeds with the carrying amount and are included in the Consolidated statement of comprehensive income.

 

Cash and cash equivalents

Cash and cash equivalents include cash in hand, deposits held at call with banks, Restricted Cash (see note 14) and other short term highly liquid investments with original maturities of three months or less.

Financial assets

The Group's financial assets mainly comprise cash, trade and other receivables.

Trade receivables are initially recognised at fair value and subsequently measured at amortised cost less provisions for impairment based upon an expected credit loss methodology. The Group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance matrix for all trade receivables (including accrued receivables). A provision of the lifetime expected credit loss is established upon initial recognition of the underlying asset and are calculated using historical account payment profiles along with historical credit losses experienced. The loss allowance is adjusted for forward looking factors specific to the debtor and the economic environment. The amount of the provision is recognised in the Consolidated statement of comprehensive income.

Financial liabilities

Financial liabilities are recognised when the Group becomes a party to the contractual agreements of the instrument. The Group's financial liabilities are categorised as loans and Trade and other payables.

At initial recognition,

·	Financial liabilities (trade and other payables, excluding other taxes and social security costs and deferred income), are measured at their fair value plus, if appropriate, any transaction costs that are directly attributable to the issue of the financial liability. These financial liabilities are subsequently carried at amortised cost.
·	Bank borrowings are initially recognised at fair value net any of transaction costs directly attributable to the issue of the instrument. Such interest-bearing liabilities are subsequently measured at amortised cost ensuring the interest element of the borrowing is expensed over the repayment period at a constant rate.

 

Leases

Right-of-use assets

The Group recognises right-of-use assets at the commencement date of the lease (i.e. the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made on or before the commencement date less any lease incentives received. Unless the Group is reasonably certain to obtain ownership of the leased asset at the end of the lease term, the recognised right-of-use assets are depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term. Right-of-use assets are subject to impairment.

Lease liabilities

At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease payments to be made over the lease term. In calculating the present value of lease payments, the Group uses the incremental borrowing rate at the lease commencement date if the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the in-substance fixed lease payments or a change in the assessment to purchase the underlying asset.

Short-term leases and leases of low-value assets

The Group applies the short-term lease recognition exemption to its short-term leases (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption to leases of office equipment that are considered of low value (i.e., below £5,000). Lease payments on short-term leases and leases of low-value assets are recognised as an expense on a straight-line basis over the lease term.

Incremental borrowing rate

 

IFRS 16 Leases requires that all the components of the lease liability are required to be discounted to reflect the present value of the payments. The discount rate to use is the rate implicit in the lease, unless this cannot readily be determined, in which case the lessee's incremental borrowing rate is used instead.

The definition of the lessee's incremental borrowing rate states that the rate should represent what the lessee 'would have to pay to borrow over a similar term and with similar security, the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment.' In applying the concept of 'similar security', a lessee uses the right-of-use asset granted by the lease and not the fair value of the underlying asset. This is because the rate should represent the amount that would be charged to acquire an asset of similar value for a similar period.

In practice, judgement may be needed to estimate an incremental borrowing rate in the context of a right-of-use asset, especially when the value of the underlying asset differs significantly from the value of the right-of-use asset.

The analysis showed that the incremental borrowing rate as at 1 January 2019 was 8.5% which was used as discount rate for all leases in all subsidiaries, which were acquired before 1 July 2020. The Group borrowed funds from its bankers in June 2020 and reviewed the incremental borrowing rate to be 4.285% and applied this rate to all leases acquired after 1 July 2020.

 

The discount rate will be revised, in line with IFRS 16, and the lease liability remeasured only when:

-	there is a change in the lease term,
-	a change in the assessment of whether the lessee is reasonably certain to exercise an option to purchase the underlying asset or
-	-a change in floating interest rates, resulting in a change in the future lease payments (this approach is consistent with IFRS 9's requirement for the measurement of a floating rate financial liabilities subsequently measured at amortised cost)

A lessee is not required to reassess the discount rate when there is a change in future lease payments due to a change in an index. - e.g. the consumer price index.

 

Share Capital

Financial instruments issued by the Group are treated as equity only to the extent that they do not meet the definition of a financial liability. The Group's ordinary share capital and share premium are classified as equity instruments.

Taxation

Current tax

Current taxes are based on the results shown in the financial statements and are calculated according to local tax rules, using tax rates enacted or substantially enacted at the balance sheet date.

Deferred tax

Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability in the consolidated statement of financial position differs from its tax base, except for differences arising on:

·	the initial recognition of goodwill;
·	the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction affects neither accounting or taxable profit; and
·	investments in subsidiaries where the Group is able to control the timing of the reversal of the difference and it is probable that the difference will not reverse in the foreseeable future.

 

Recognition of deferred tax assets is restricted to those instances where it is probable that taxable profit will be available against which the difference can be utilised.

The amount of the asset or liability is determined using tax rates that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the deferred tax liabilities or assets are settled or recovered. Deferred tax balances are not discounted.

Deferred tax assets and liabilities are offset when the Group has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority on either:

·	the same taxable group company; or
·	different company entities which intend either to settle current tax assets and liabilities on a net basis, or to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax assets and liabilities are expected to be settled or recovered.

 

Business combinations

The acquisition of subsidiaries is accounted for using the acquisition method. The cost of the acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree.  Costs related to acquisitions, other than those directly attributable to the issue of debt or equity, are expensed as incurred.

Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the business combination over the Group's interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. If, after reassessment, the Group's interest in the net fair value of the acquiree's identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, the excess is recognised immediately in the profit or loss.

Critical accounting estimates and judgements

In preparing these Consolidated financial statements, the Group has made its best estimates and judgements of certain amounts included in the financial statements, giving due consideration to materiality. The Group regularly reviews these estimates and updates them as required. Actual results could differ from these estimates. Unless otherwise indicated, the Group does not believe that there is a significant risk of a material change to the carrying value of assets and liabilities within the next financial year related to the accounting estimates and assumptions described below. The Group considers the following to be a description of the most significant estimates and judgements, which require the Group to make subjective and complex judgements and matters that are inherently uncertain.

(a)   Goodwill, Intangible assets acquired in a business combination

As set out in the accounting policies above, intangible assets acquired in a business combination are capitalised and amortised over their useful lives. Both initial valuations and valuations for subsequent impairment tests are based on risk adjusted future cash flows discounted using appropriate discount rates. These future cash flows are based on forecasts which are inherently judgemental.  Future events could cause the assumptions to change which could have an adverse effect on the future results of the Group. Refer to note 11 for a description of the specific estimates and judgements used including the critical accounting estimates and judgments used in the calculation of the goodwill impairment.

(b) Held for sale

Non-current assets and disposal groups are classified as held for sale if it is probable their carrying amount will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset (or disposal group) is available for immediate sale in its present condition. For a sale to be highly probable, management should be committed to a plan to sell the asset (or disposal group), an active program to locate a buyer and plan initiated, the asset (or disposal group) should be actively marketed at a price which is reasonable in relation to its current fair value, the sale should be expected to be completed within one year from the date of classification, and actions required to complete the plan should indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. In respect to the group's Identity business and as of year end, while management were considering strategic options, they were not committed to a plan nor was there knowledge or belief that a sale would be definitively complete; taking account of this the Identity business was not deemed held for sale.

(c)   Share-based payments

The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. Estimating fair value for share-based payment transactions requires determining the most appropriate valuation model, which is dependent on the terms and conditions of the grant. This estimate also requires determining the most appropriate inputs to the valuation model including the expected life of the share option, volatility and dividend yield and making assumptions about them. Where such a model is required, the group is using the Black Scholes model to calculate its share-based compensation expenses. (Please refer to note 20 for full details).

(d)   Taxation

In recognising income tax assets and liabilities, management makes estimates of the likely outcome of decisions by tax authorities on transactions and events whose treatment for tax purposes is uncertain. Where the final outcome of such matters is different, or expected to be different, from previous assessments made by management, a change to the carrying value of income tax assets and liabilities will be recorded in the period in which such a determination is made. In recognising deferred tax assets and liabilities management also makes judgements about likely future taxable profits. The carrying values of current tax and deferred tax assets and liabilities are disclosed separately in the consolidated statement of financial position.

(e) Impairment of goodwill and other intangible assets

Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a potential impairment. The carrying value of goodwill is compared to the recoverable amount of the cash generating unit to which the goodwill has been allocated, which is the higher of value in use and the fair value less costs of disposal. Any impairment is recognised immediately as an expense and is not subsequently reversed.

Other intangible assets include acquired merchant relationships, an IT Platform and Domain names as well as internally developed intangibles (capitalized development costs). Acquired intangible assets are recognised at fair value at the acquisition date and are amortized on a straight-line basis over their estimated useful lives.

Impairment reviews are undertaken if events or changes in circumstances reveal any indicators of impairment. If indicators of impairment are present, the carrying value of the asset is compared to the recoverable amount of the cash generating unit to which the asset is allocated, which is the higher of value in use and the fair value less costs of disposal. Any impairment is recognised immediately as an expense.

It is possible that changes in economic conditions or deviations in actual performance from forecast could result in a material adjustment to the carrying value of the CGU within the next financial year.  The key estimates made by management are set out in note 11. 

 

3.    Financial instruments - Risk Management

The Board has overall responsibility for the determination of the Group's risk management objectives and policies. The overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly affecting the Group's competitiveness and flexibility. The Group reports in US$. All funding requirements and financial risks are managed based on policies and procedures adopted by the Board of Directors. The Group does not issue or use financial instruments of a speculative nature.

The Group is exposed to the following financial risks:

·	Market risk
·	Credit risk
·	Liquidity risk

In common with all other businesses, the Group is exposed to risks that arise from its use of financial instruments. The principal financial instruments used by the Group, from which financial instrument risk arises, are as follows:

·	Trade and other receivables
·	Cash and cash equivalents and restricted cash
·	Trade and other payables
·	Bank loans

To the extent financial instruments are not carried at fair value in the consolidated statement of financial position, book value approximates to fair value at 31 December 2021 and 31 December 2020

Trade and other receivables are measured at book value and amortised cost. Book values and expected cash flows are reviewed by the Board and any impairment charged to the consolidated statement of comprehensive income in the relevant period.

Trade and other payables are measured at book value and amortised cost.

Financial instruments by category

Financial assets		31 December 2021	31 December 2020
		$'000	$'000
Cash and cash equivalents		56,651	61,290
Restricted cash		5,789	1,414
Total Cash		62,440	62,704
Accounts receivable (net)		78,606	86,360
Other receivables (including contingent asset)		484	3,100
Total other financial assets		79,090	89,460
Cash, and other financial assets		141,530	152,164

 

Financial liabilities

		31 December 2021	31 December 2020
		$'000	$'000
Trade payables		94,152	105,376
Accruals		23,375	28,135
Total other financial liabilities		117,527	133,511
Bank loans (secured)		7,813	12,250
Lease liabilities		4,833	3,178
Loans and borrowings		12,646	15,428
Financial liabilities at amortised cost		130,173	148,939

 

The management of risk is a fundamental concern of the Group's management. This note summarises the key financial risks to the Group and the policies and procedures put in place by management to manage them.

a) Market risk

Market risk arises from the Group's use of interest bearing and foreign currency financial instruments.  There is a risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in interest rates (interest rate risk) or foreign exchange rates (currency risk).

Interest rate risk

The Group is exposed to cash flow interest rate risk from bank borrowings at variable rates but with a lower floor. The Group's bank borrowings and other borrowings are disclosed in note 17. Interest rates for the current Boku bank loan were based on LIBOR, however the decision was made to phase out LIBOR by the end of 2021 .  Current contracts have been agreed at similar or equivalent rates after transition and did not have a material effect on the Group finances. The Group manages the interest rate risk centrally. After year end, the term loan was repaid in full on 28 February 2022 following the disposal of the Identity division to Twilio.

The following table demonstrates the sensitivity to a 1 percent change (higher only due to the fixed lower floor) to the interest rates of the following borrowings at 31 December 2021 to the profit before tax and net assets for the period:

		31 December 2021	31 December 2020
		Increase/(decrease) of loss before tax and net assets	Increase/(decrease) of loss before tax and net assets
		$'000	$'000
Bank loans		+81	+124

 

Foreign exchange risk

Foreign exchange risk is the risk that movements in exchange rates affect the profitability of the business.

The effect of fluctuations in exchange rates on the Euro and GBP denominated trade receivables is partially offset through the use of foreign exchange contracts to the extent that any remaining impact on profit after tax is not material.

The Group aims to fund expenses and investments in the respective currency and to manage foreign exchange risk at a local level by matching the currency in which revenue is generated and expenses are incurred. The Group manages all treasury activities centrally, with the exception of the  acquired Fortumo entities where treasury processes are in the process of being aligned with group treasury policies and procedures.

As of 31 December, the Group's gross exposure to foreign exchange risk was as follows:

 

	GBP	Euro	Other	Total
31 December 2021	$'000	$'000	$'000	$'000
Trade and other receivables	12,399	28,352	34,500	72,521
Cash and cash equivalents and restricted cash	9,849	14,268	23,511	47,628
Trade and other payables	(18,934)	(47,757)	(45,006)	(111,697)
Financial assets/(liabilities)	3,314	(5,137)	13,005	11,182
10% impact - +/-	368	(571)	1,445	1,242
	GBP	Euro	Other	Total
31 December 2020	$'000	$'000	$'000	$'000
Trade and other receivables	11,630	25,375	46,476	83,481
Cash and cash equivalents and restricted cash	10,083	15,912	21,053	47,048
Trade and other payables	(21,138)	(60,967)	(41,542)	(123,647)
Financial assets/(liabilities)	575	(19,680)	25,987	6,882
10% impact - +/-	64	(2,187)	2,887	765

The group operates in 37 currencies. We have separated GBP and Euro as the two primary currencies. The other 35 currencies are include in the 'Other' column. The impact of 10% movement in foreign exchange rate of US$ will result in an increase/decrease of total comprehensive profit/loss after tax and financial assets/(liabilities) of $1,242 thousands for December 2021 (2020: $765 thousands).

b) Credit risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The Group is mainly exposed to credit risk from credit sales.  The Group's net trade receivables for the three reported periods are disclosed in the financial assets table above.

The Group is exposed to credit risk in respect of these balances such that, if one or more the aggregators or MNOs encounters financial difficulties, this could affect the Group's financial results. The Group attempts to mitigate credit risk by assessing the credit rating of new customers and MNOs prior to entering into contracts, by entering contracts with customers with agreed credit terms and also by limiting its liability to its customers in the event of non-payment from MNOs and aggregators.

To minimise this credit risk, the Group endeavours only to deal with companies which are demonstrably creditworthy and this, together with the aggregate financial exposure, is continuously monitored. The maximum exposure to credit risk is the value of the outstanding receivables amount from carriers/aggregators less the value of corresponding outstanding amount payable to merchants, which equals to the  loss of revenue recorded in the financial statements in respect of the uncollected funds.

At the reporting date, the exposure was represented by the carrying value of trade and other receivables, against which $149 thousands was provided at 31 December 2021 (2020: $1,323 thousands). The provision amounts represent an estimate of potential bad debt in respect of the year-end Group trade receivables. The Group's customers are spread across a broad range of sectors and consequently it is not otherwise exposed to significant concentrations of credit risk on its trade receivables.

A debt is considered to be bad when it is deemed irrecoverable, for example when the debtor goes into liquidation, or when a credit or partial credit is issued to the customer for goodwill or commercial reasons. The Group has applied the Simplified Approach applying a provision matrix based on number of days past due being greater than 150 days to measure expected credit losses and after taking into account customer sectors with different credit risk profiles,history of collections and current and forecast trading conditions.

The Group's provision matrix is as follows:

31-Dec-21	< 60 days	61-120 days	121-150 days	> 150 days	Total
Expected credit loss % range	0%	0%	0%	95%-100%
Gross carrier receipts ($'000)	77,775	491	340	756	79,362
Expected credit loss rate ($'000)	-	-	-	(149)	(149)

 

At 31 December 2021 the Group had a provision for $149 thousands (31 December 2020: $1.323 million) of which $36 thousands was utilised and $1,137 thousands was fully reversed in the year - see Note 13 for full details of the movement in the year.  As the company revenue is recorded as the net between the amounts received from carriers and aggregators less the amounts payable to merchants,  the provision of $149 thousands has been created in the year against receivables. This represents the management best estimate of the potential revenue loss for the Group if the $756 thousands old receivables were not received from carriers. The acquisition of Fortumo and the alignment of our Payment divisions policies and procedures has resulted in an enhanced contractual position in the event of carrier non-payment, which has increased protection from the possible downside risk and related credit loss and as a result the expected credit risk loss in 2021 is lower than in prior years.

 

31-Dec-20	< 60 days	61-120 days	121-150 days	> 150 days	Total
Expected credit loss % range	0%	0%	0%	95%-100%
Gross carrier receipts  ($'000)	82,597	1,880	1,883	1,323	87,683
Expected credit loss rate ($'000)	-	-	-	(1,323)	(1,323)
					86,360

 

Other receivables are considered to be low risk. Management do not consider that there is any concentration of risk within other receivables. No other receivables have been impaired.

Credit risk on cash and cash equivalents is considered to be small as the counterparties are all substantial banks with high credit ratings. The maximum exposure is however the amount of the deposit. To date, the Group has not experienced any losses on its cash and cash equivalent deposits.

c) Liquidity risk

Liquidity risk arises from the Group's management of working capital. It is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due. The Group's policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities when they become due. The table below analyses the Group's financial liabilities by contractual maturities (all amounts disclosed in the table are the undiscounted contractual cash flows):

 

31 December 2021	Within 1 year	2-5 years	More than 5 years
	$'000	$'000	$'000
Trade and other payables	119,641	1,700	-
Bank loans and overdrafts (secured)*	1,250	6,875	-
Leases liabilities	1,477	3,868	-
Total	122,369	12,4436	-

*No material difference between discounted and undiscounted fair value.

31 December 2020	Within 1 year	2-5 years	More than 5 years
	$'000	$'000	$'000
Trade and other payables	136,779	862	-
Bank loans and overdrafts (secured)*	1,438	10,813	-
Leases liabilities	1,625	1,937	-
Total	139,842	13,612	-

*No material difference between discounted and undiscounted fair value.

Capital Management

The Group's capital is made up of share capital, foreign exchange reserve and retained losses.

The Group's objectives when maintaining capital are:

·	To safeguard the entity's ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders; and
·	To provide an adequate return to shareholders by pricing products and services commensurately with the level of risk

The capital structure of the Group consists of shareholders' equity as set out in the consolidated statement of changes in equity. All working capital requirements are financed from existing cash resources and borrowings.

4.   Segmental analysis

 

(a)    Operating Segments - primary basis

Prior to 1 Jan 2019, the Group considered that for executive management purposes, the Group had one reportable segment - provision of a payment platform for processing payments for virtual goods and digital goods purchases. Following the acquisition of Danal Inc on 1 January 2019, the Group revised its activities into two operating segments, Payments and Identity, as disclosed below. The segments are based on the Group's main revenue generating activities. On 1 July 2020, the Group completed the acquisition of payments company Fortumo Holdings Inc and its subsidiaries. Fortumo was a competitor to Boku and operated in the same carrier billing space as the existing Boku payments business. Therefore, the results of Fortumo OǗ (the trading subsidiary of Fortumo Holdings Inc) and its subsidiaries together with the existing Boku Payments business are viewed by the management as one Payments segment.

The Group CEO and CFO review the management reports for both segments monthly before sending the results to the Board.

The following summary describes the operations in each of the Group's reportable segments:

Payments Segment - provision of payment platform which enables mobile phone users to buy goods and services and charge them to their mobile phone or prepaid balance.

In 2021 there were two customers, within the Payments Segment  with revenue amounting to more than 10% (each) of the payments segment revenue (2020: 1 customer).

Identity Segment - provision of Identity services which are used to simplify transactions or combat fraud.

Operating segment information under the primary reporting format is disclosed below:

Boku Income Statement by segment for 12 months to 31 December 2021	2021
	Total Payments	Total  Identity	Total Group
	$'000	$'000	$'000
Fee Revenue	62,082	7,083	69,165
Cost of sales	(1,571)	(4,162)	(5,733)
Gross Profit	60,511	2,921	63,432
Other Income (non-recurring)	1,080	-	1,080
Administrative Expenses	(50,951)	(8,426)	(59,377)
Operating gain/(loss) analysed as:
Adjusted EBITDA*	22,922	(2,894)	20,028
Other Income (non-recurring)	1,080	-	1,080
Depreciation and amortisation	(6,251)	(1,236)	(7,487)
Stock Option expense	(6,414)	(977)	(7,391)
Foreign exchange gains / (losses)	115	(249)	(134)
Exceptional items (included in administrative expenses)	(812)	(149)	(961)
Operating gain/(loss)	10,640	(5,505)	5,135
Finance income	22	-	22
Finance expense	(770)	-	(770)
Profit/(Loss) before tax	9,892	(5,505)	4,387
Tax credit	1,882	-	1,882
Net profit/(loss) for the period attributable to equity holders of the parent company	11,774	(5,505)	6,269

*Earnings before interest, tax, depreciation, amortisation, non-recurring other income, stock option expense, foreign exchange gains/(losses) and exceptional items. Management has assessed this performance measure as relevant for the user of the accounts.

The consideration for the Fortumo acquisition included $5.4m, representing 12% of the total maximum consideration, held in escrow in cash, subject to certain Adjusted EBITDA* earnout, working capital and indemnity conditions being satisfied in the period 1^st July 2020 to 30 June 2021.

The final earnout payment, based on Fortumo Adjusted EBITDA* performance for the 12 months period ended 30 June 2021, was $2.16m, with the balance of $3.24 million returned to Boku.

The difference of $1.08 million between the expected fair value of the Fortumo earnout escrow amount as at 31 December 2020 of $3.24 million and the actual amount paid to Fortumo shareholders in September 2021, of $2.16 million has been shown as "Other Income" in the Income Statement. This amount has been excluded from the adjusted EBITDA* as a non-trading, non-recurring item.

Boku Income Statement by segment for 12 months to 31 December 2020	2020
	Total Payments	Total Identity	Total
	$'000	$'000	$'000
Fee Revenue	51,231	5,171	56,402
Cost of sales	(1,669)	(3,256)	(4,925)
Gross Profit	49,562	1,915	51,477
Administrative Expenses	(39,737)	(28,463)	(68,200)
Operating gain/(loss) analysed as:
Adjusted EBITDA*	19,176	(3,908)	15,268
Payments Revenue Adjustment (non-recurring)
Depreciation and amortisation	(4,726)	(1,191)	(5,917)
Stock Option expense	(4,010)	(915)	(4,925)
Goodwill impairment	-	(20,775)	(20,775)
Foreign exchange gains	807	241	1,048
Exceptional items (included in administrative expenses)	(1,422)	-	(1,422)
Operating gain/(loss)	9,825	(26,548)	(16,723)
Finance income	70	-	70
Finance expense	(649)	(13)	(662)
Profit/(Loss) before tax	9,246	(26,561)	(17,315)
Tax expense	(1,469)	(1)	(1,470)
Net gain/(loss) for the period attributable to equity holders of the parent company	7,777	(26,562)	(18,785)

The net assets for each segment are disclosed below:

Net Assets by segment	2021
	Payments	Identity	Consolidated
Non-current assets	$'000	$'000	$'000
Property, plant, and equipment	5,668	2	5,670
Intangible assets	58,777	4,340	63,117
Deferred tax assets	3,105	-	3,105
Total non-current assets	67,550	4,342	71,892
Current Assets
Trade and other receivables	81,102	1,455	82,557
Cash and cash equivalents	55,565	1,086	56,651
Restricted cash	5,789	-	5,789
Total current assets	142,456	2,541	144,997
Total assets	210,006	6,883	216,889
Current liabilities
Trade and other payables	118,201	1,440	119,641
Loans and borrowings	2,455	5	2,460
Total current liabilities	120,656	1,445	122,101
Non-current liabilities
Trade and other payables	2,156	-	2,156
Loans and borrowings	10,191	(5)	10,186
Total non- current liabilities	12,347	(5)	12,342
Total liabilities	133,003	1,440	134,443
Net assets	77,003	5,443	82,446

 

Net Assets by segment	2020
	Payments	Identity	Consolidated
Non-current assets	$'000	$'000	$'000
Property, plant, and equipment	3,749	22	3,771
Intangible assets	60,252	5,307	65,559
Deferred tax assets	483	-	483
Total non-current assets	64,484	5,329	69,813
Current Assets
Trade and other receivables	91,122	1,413	92,535
Cash and cash equivalents	61,038	252	61,290
Restricted cash	1,414	-	1,414
Total current assets	153,574	1,665	155,239
Total assets	218,058	6,994	225,052
Current liabilities
Trade and other payables	135,203	1,576	136,779
Loans and borrowings	2,863	11	2,874
Total current liabilities	138,066	1,587	139,653
Non-current liabilities
Trade and other payables	1,090	-	1,090
Loans and borrowings	12,560	(5)	12,555
Total non- current liabilities	13,650	(5)	13,645
Total liabilities	151,716	1,582	153,298
Net assets	66,342	5,412	71,754

 

(b)   Geographic segment - secondary basis

The geographical analysis of the revenue by location of the users and segment is presented below:

 

Group Revenue by Region and Segment	Payments			Identity			Total
' 000 USD	Dec-21 YTD	%		Dec-21 YTD	%		Dec-21 YTD	%
Americas	3,018	4.9%		5,621	79.4%		8,639	12.5%
APAC	33,444	53.9%		1,065	15.0%		34,509	49.9%
EMEA	25,620	41.3%		397	5.6%		26,018	37.6%
Grand Total	62,082	100.0%		7,083	100.0%		69,165	100.0%

 

Group Revenue by Region and Segment	Payments			Identity			Total
' 000 USD	Dec-20 YTD	%		Dec-20 YTD	%		Dec-20 YTD	%
Americas	1,556	3.0%		4,847	93.7%		6,403	11.4%
APAC	28,398	55.4%		90	1.7%		28,488	50.3%
EMEA	21,277	41.5%		234	4.5%		21,511	38.1%
Grand Total	51,231	100.0%		5,171	100.0%		56,402	100.0%

 

An analysis of non-current assets by geographical market is given below:

		2021	2020
		$'000	$'000
United States of America		51,662	47,613
Europe		16,551	20,996
Rest of the World		575	721
Total		68,788	69,330

 

5.   Administrative expenses (including exceptional items)

		2021	2020
		$'000	$'000
Audit fees - BDO LLP & all subsidiaries audits		524	361
Third party audit fees specific to FY 2020 - EY fees		-	45
Taxation services (not performed by auditor)		749	289
Professional services not performed by auditor		113	122
Consultancy and compliance services		835	1,005
Staff costs (excluding stock option expense - note 6)		33,598	29,032
Travel & entertainment		408	343
Property occupancy costs		1,203	935
Total IT, development and hosting		3,453	2,721
Total banking costs		506	52
Legal fees		879	718
Other costs including marketing, support & testing and other administration expenses		1,136	586
Operating Expenses, excluding items in Adjusted EBITDA		43,404	36,209
Depreciation of property, plant and equipment		2,255	2,446
Amortisation of intangible assets		5,232	3,471
Impairment of goodwill (Identity Business)		-	20,775
Foreign exchange loss/(gain)		134	(1,048)
Exceptional items - restructuring costs*		961	184
Exceptional items - acquisition costs		-	1,238
Share - based expenses (note 20)		7,391	4,925
Total administrative expenses		59,377	68,200

 

*Exceptional items of $961 thousands represent professional fees related to contracted costs exploring opportunities for the Identity business.

6.   Key management personnel costs

 

Key management personnel compensation was made up as follows:

				2021	2020
				$'000	$'000
Salaries				3,455	2,431
Short-term benefits				35	41
Social security costs				1,298	240
Stock option expense				2,126	1,464
Pension costs				8	7
Total				6,922	4,183
Directors' remuneration included in staff costs:				2021	2020
				$'000	$'000
Salaries including bonuses				1,424	1,077
Short-term benefits				3	3
Total				1,427	1,080

 

7.   Finance income and expenses

		2021	2020
		$'000	$'000
Finance income
Interest income from bank deposits		22	70
Total		22	70
Finance expenses
Interest on bank loans & overdrafts		385	277
Other interest payable (including interest paid for factoring)		25	31
Interest on lease liabilities		235	292
Amortisation of debt costs		125	62
Total		770	662
Net finance expenses		748	592

 

8.   Income tax

		2021	2020
		$'000	$'000
Current tax
US tax		-	2
Foreign tax		513	374
Total current tax		513	376
Deferred tax (credit)/expense		(2,395)	1,094
Total tax (credit) / expense		(1,882)	1,470

 

The reasons for the difference between the actual tax charge for the period and the applicable rate of income tax of the US reporting entity applied to the result for the period are as follows:

			2021	2020
			$'000	$'000
Profit before tax			4,387	(17,315)
Tax rate			21%	21%
Profit/(loss) before tax multiplied by the applicable rate of tax:			921	(3,636)
Expenses not deductible for tax purposes			2	4,628
Withholding taxes			78	68
Recognition of tax losses			(2,646)	-
Other- difference in tax rates and adjustments in respect of prior years			(237)	410
Total tax (credit)/expense			(1,882)	1,470

 

Deferred Tax
						2021		2020
						$'000		$'000
Net opening position						253		1,377
Arising from business combinations						-		-
Net recognition (de-recognition) / in the year						2,359		(1,094)
Foreign exchange revaluation						37		(30)
Net closing position						2,649		253

 

The net closing position is made up of:

o	A deferred tax liability of $456,097 (2020: $227,956): This constitutes tax positions connected with the Boku Inc UK fixed temporary differences. The 2020 balance is connected with a deferred tax liability associated with intangible assets acquired as part of the legacy business combination with the group's now German business: this was released in the year.
o	The deferred asset of $3,105,382 (2020: $482,573). This increase relates primarily to the recognition in the USA and UK of available losses.. Each year the management assess the usability of the deferred assets.

 

A deferred tax asset (liability) has not been recognised for the following:
						2021           '000	2020           '000
Non- deductible Reserves					39		100
Accrued Compensation					84		161
Stock Based Compensation					1,819		1,857
Other temporary and deductible differences					527		648
Accelerated Capital Allowances					(1,510)		(1,000)
Losses recognised					(2,623)		-
Acquired Intangibles					(169)		(245)
Unused tax credits					189		189
Unused tax losses					32,254		30,816
Total deferred tax assets						30,610	32,526

The Group has carried forward losses and accelerated timing differences at the reporting date as shown below.  In respect of its UK subsidiary, these can be carried forward and offset against UK taxable income indefinitely. In respect of its US entities, net operating loss carry forwards can be carried forward and offset against taxable income for 20 years for losses incurred up to and including 31 December 2017.  All net operating loss carry forwards incurred after 31 December 2017 can be carried forward and offset against US taxable income indefinitely. Utilisation of net operating loss or tax credit carry forwards may be subject to annual limitations if an ownership change had occurred pursuant to the section 382 Internal Revenue Code and similar state provisions.

		2021	2020
		$'000	$'000
US losses and tax credit - federal and states		183,226	181,516
Non-US losses (includes US entities deemed to be under non-US tax jurisdictions)		7,525	5,021
Total		190,751	186,537

The unused tax losses must be utilised by various dates.  German tax losses as at 31 December 2021 are now reduced to zero, as all losses were to be used before 2022. U.S. federal tax losses of $175,283,600 expire in various dates through 2027.  Other unused losses of $15,467,430 do not expire

9.   Profit / (Loss) per share

		2021	2020
Profit/(loss) attributable to shareholders of the Company ($'000)		6,269	(18,785)
Weighted average number of common shares		293,975,346	273,836,772
Basic profit/(loss) per share		0.0213	(0.069)
Diluted profit/(loss) per share		0.0206	(0.069)

Profit or Loss per share is calculated based on the share capital of Boku, Inc. and the earnings of the Group. Diluted earnings per share was calculated using the treasury method. In 2020, due to the loss, in the reporting period diluted loss per share is the same as basic loss per share.

10.            Property, plant and equipment

	Right of use assets	Computer equipment & software	Office equipment and fixtures and fittings	Leasehold improvement	Total
		$'000	$'000	$'000	$'000
COST
At 1 January 2020	4,992	1,213	1,525	184	7,914
Additions	1,526	215	109	171	2,021
Acquisitions	542	2	22	-	566
Disposals	(30)	(2)	(37)	-	(69)
Exchange adjustment	192	8	26	8	234
As at 31 December 2020	7,222	1,436	1,645	363	10,666
Additions	3,973	337	19	-	4,329
Disposals	(4,307)	(545)	(1,372)	(105)	(6,329)
Exchange adjustment	(99)	(14)	(16)	(3)	(132)
At 31 December 2021	6,789	1,214	276	255	8,534
DEPRECIATION
At 1 January 2020	2,009	800	1,473	120	4,402
Acquisitions	-	-	9	-	9
Charge for the year	2,121	227	50	48	2,446
Disposals	(30)	(2)	(37)	-	(69)
Exchange adjustment	54	3	48	2	107
At 31 December 2020	4,154	1,028	1,543	170	6,895
Charge for the year	1,879	270	53	53	2,255
Disposals	(4,187)	(545)	(1,370)	(105)	(6,207)
Exchange adjustment	(58)	(9)	(10)	(2)	(79)
At 31 December 2021	1,788	744	216	116	2,864
NET BOOK VALUE
At 1 January 2020	2,983	413	52	64	3,512
At 31 December 2020	3,068	408	102	193	3,771
At 31 December 2021	5,001	470	60	139	5,670

 

The Group leases many assets including buildings and IT equipment. The information about leases for which the group is a lessee is presented below:

Type of right-of-use assets - $'000(USD)	Property	IT Equipment	Total
Balance as at 1st January 2020	2,303	680	2,983
Additions	2,182	53	2,235
Disposals	(30)	-	(30)
Depreciation charge for the year	(1,677)	(443)	(2,120)
NBV balance as at 31 December 2020	2,778	290	3,068
Additions	3,543	430	3,973
Disposals	(120)	-	(120)
Exchange adjustment	(41)	-	(41)
Depreciation charge for the year	(1,499)	(380)	(1,879)
NBV balance as at 31 December 2021	4,661	340	5,001

 

11.          Intangible assets

	Domain name	Developed technology	Merchant relationships	Trade marks	Goodwill	Internally developed software	Total
	$'000	$'000	$'000	$'000	$'000	$'000	$'000
COST
At 1 January 2020	140	3,774	9,010	110	41,085	6,939	61,058
Additions	-	-	-	-	-	2,920	2,920
Additions from acquisitions	1,834	4,343	7,172	-	25,068	-	38,417
Goodwill Impairment	-	-	-	-	(20,775)	-	(20,775)
Disposal	-	-	-	-	-	(257)	(257)
Exchange Adjustment		280	794		1,242	92	2,408
At 31 December 2020	1,974	8,397	16,976	110	46,620	9,694	83,771
Additions	-	-	-	-	-	5,022	5,022
Exchange adjustment	(138)	(396)	(1,226)	-	(1,242)	(95)	(3,096)
At 31 December 2021	1,836	8,001	15,750	110	45,379	14,621	85,697
AMORTISATION
At 1 January 2020	140	2,240	6,743	-	-	5,116	14,239
Charge for the period	91	556	1,572	-	-	1,252	3,471
Disposal	-	-	-	-	-	(257)	(257)
Exchange adjustment	1	22	672	-	-	64	759
At 31 December 2020	232	2,818	8,987	-	-	6,175	18,212
Charge for the period	177	873	1,832	-	-	2,350	5,232
Exchange adjustment	(14)	(91)	(708)	-	-	(51)	(864)
At 31 December 2021	395	3,600	10,111	-	-	8,474	22,580
NET BOOK VALUE
At 1 January 2020	-	1,534	2,267	110	41,085	1,823	46,819
At 31 December 2020	1,742	5,579	7,989	110	46,620	3,519	65,559
At 31 December 2021	1,441	4,401	5,639	110	45,378	6,147	63,117

 

Management has reviewed goodwill and intangible assets on the balance sheet which mainly consist of the assets from the acquisition of Fortumo Holdings Inc. on 1 July 2020, Danal Inc (renamed Boku Identity Inc) on 1 January 2019 and Mopay AG ("Mopay") in October 2014.

Fortumo Holdings Inc. was acquired by Boku on 1st July 2020 for cash and restricted stock units (RSUs) for a total maximum consideration of $45.0 million with a fair value of $42.3 million. The fair value measurement of Fortumo Holdings' Inc. intangible assets and goodwill arose from the purchase price allocation work which was undertaken in July 2020. As a result, several assets have been identified and their fair value has been determined in accordance with IFRS 3. The carrying value of the goodwill and other intangibles from the Fortumo acquisition are therefore assessed in total as part of the Boku Payments Segment (Payments CGU).

Boku Inc. acquired payments company Mopay in October 2014 for a total value of $24.2 million in cash and shares. After the merger in 2014, the Mopay business was reorganised and incorporated into the Boku Payments business The carrying value of  goodwill from the Mopay acquisition and other intangibles are therefore assessed in total as part of the Boku Payments Segment (Payments CGU).

Danal Inc (renamed 'Boku Identity Inc') was acquired on 1 January 2019) for a total value of $25.1 million. The fair value measurement of Danal's intangible assets and goodwill arose from the purchase price allocation which was undertaken in January 2019. As a result, the Identity platform and contracts were determined to be one asset and have a fair value of $1.9m USD as at 1 January 2019. The two platforms (Identity and Payments platforms) are operated independently and have independent cashflows. The carrying value of goodwill and the Identity platform were allocated to the Identity segment.

Impairment of Goodwill

At the year-end date an impairment test has been undertaken by comparing the carrying values with the recoverable amount of the Group's two cash generating units (CGUs). The recoverable amount of the cash generating unit is based on value-in-use calculations. These calculations use cash flow projections covering future periods based on financial budgets and a calculation of the terminal value, for the period following these formal projections.

The key assumptions used for value-in-use calculations are those regarding projected cash flows, growth rates, increases in costs and discount rates. The discount rate used was the Weighted Average Cost of Capital. The discount rate is reviewed annually to take into account the current market assessment of the time value of money and the risks specific to the cash generating units and rates used by comparable companies. The pre-tax discount rate used for both CGU's to calculate value-in-use is the weighted average cost of capital (WACC) of 14.6% (2020:13.8%). Growth rates for forecasts take into account historic experience and current market trends. Costs are reviewed and increased for various cost pressures. The terminal value calculation for 2021 was based on growth rate of post-tax free cashflow of 2% (2020:2%) for each CGU.

The 2022 budget was prepared at the consolidated level and by division (Payments division and Identity division). Revenue and Adjusted EBITDA were also projected from fiscal year 2022 through to 2024. In 2021 Group revenue growth was 23% (2020: 12.5%) while Adj. EBITDA increased by 31% (2020: 107% increase).

Payments CGU

The goodwill assessment includes the following Payments CPU's revenue growth assumptions for years following the 2021 financial year: revenues will grow by 11.9% in 2022, 18.6% in 2023 and 9.8% in 2024 and remain fairly constant after that, showing a conservative increase, but still in double digits, but with revenues growing at a slower pace than previously. The payments business is a mature, established business in multinational markets.

From a sensitivity perspective, the impairment analysis shows that the net present value of cashflows would have to be reduced by a factor of five in order for the carrying amount of goodwill to equal the value in use of the CGU on the balance sheet at the end of 2024 and by a factor of four in order for the carrying amount of all intangibles to equal the value in use of the CGU on the balance sheet at the end of 2021 which the group considers to be highly unlikely.

Identity CGU

In 2020 Identity business revenues were impacted by Covid, this together with a lower pipeline conversion resulted in lower expected revenue. As a result, the Group reassessed the recoverability of goodwill and based on this recorded an impairment of Goodwill in 2020 of $20.8 million reducing it from $23.6 million to $2.8 million.

In 2021 the Identity CGU performance improved with revenues up 31% to $7.1m and a reduced adjusted EBITDA loss. After the year end an agreement was reached with Twilio, Inc. ("Twilio"), the leading cloud communications platform, to acquire Boku's Identity division comprising its wholly-owned subsidiary Boku Identity, Inc., as announced on 19 January 2022, for a maximum consideration of $32.3 million payable in cash and the transaction was closed on 28 February 2022. As the recoverable amount is much higher than the value in use, no impairment was deemed necessary for this CGU at 31 December 2021.

Climate change

We considered climate change when reviewing cashflows and impairment however as stated in the ESG section of this report, Boku is an online payments company and as such its climate change impact is low as its business is all online and its merchants' business is the sale of digital goods such as streaming services. Therefore any potential impact was not considered material when looking at cashflows and intangibles.

12.  Subsidiaries

The principal subsidiaries of the Company, all of which have been included in the consolidated financial information, are as follows:

Name (% owned by Parent)	Parent	Principal activity	Location
Boku Payments Inc. (100%)	Boku Inc.	Holding Company	USA
Boku Network Services Inc. (100%)	Boku Inc.	Holding Company	Delaware, USA
Boku Account Services Inc. (100%)	Boku Inc.	Holding Company	Virginia, USA
Boku Account Services UK, Ltd. (100%)	Boku Account Services Inc. (Virginia)	Mobile payment solutions	UK
Paymo Brazil Servicios de Pagamentos Ltd (99.9%)	Boku Network Services Inc. (Delaware)	Mobile payment solutions	Brazil
Boku Network Services AG (100%)	Boku Inc.	Holding Company	Germany
Boku Network Services UK, Ltd (100%)	Boku Network Services Inc. (Delaware)	Mobile payment solutions	UK
Boku Network Services AU Pty Ltd (100%)	Boku Network Services Inc. (Delaware)	Mobile payment solutions	Australia
Boku Network Services IN Privates Limited  (100%)	Boku Network Services Inc. (Delaware)	Mobile payment solutions	India
Boku Network Services SG PTE. LTD (100%)	Boku Network Services Inc. (Delaware)	Mobile payment solutions	Singapore
Boku Network Services HK LTD (100)	Boku Network Services Inc. (Delaware)	Mobile payment solutions	Hong Kong
Boku Network Services Taiwan Branch Office (100%)	Boku Network Services Inc. (Delaware)	Mobile payment solutions	Taiwan
Boku Network Services Japan Branch Office (100%)	Boku Network Services Inc. (Delaware)	Mobile payment solutions	Japan
Mopay AG Beijing Representative Branch (100%)	Boku Network Services AG (Germany)	Mobile payment solutions	China
Boku Identity Inc.(100%)	Boku Inc.	Identity solutions	California, USA
Boku Mobile Solutions Ireland (100%)	Boku Identity Inc.	Identity solutions	California, USA
Boku Network Services SG PTE. LTD.(100%)	Boku Network Services Inc. (Delaware)	Mobile payment solutions	Singapore
Boku Network Services HK LTD (100%)	Boku Network Services Inc. (Delaware)	Mobile payment solutions	Hong Kong
Boku Network Services IE Limited (100%)	Boku Network Services Inc. (Delaware)	Mobile payment solutions	Ireland
Boku Network Services Malaysia (100%)	Boku Network Services Inc. (Delaware)	Mobile payment solutions	Malaysia
Fortumo Holdings Inc (100%)	Boku Network Services Inc. (Delaware)	Holding Company	USA
Boku Network Services TH Co Ltd. .(49.9%)	Boku Network Services Inc. (Delaware)	Mobile payment solutions	Thailand
Boku Network Services PH, Inc. .(100%)	Boku Network Services Inc. (Delaware)	Mobile payment solutions	Philippines
Boku Network Services MX S. DE R.L. DE C.V .(100%)	Boku Network Services Inc. (Delaware)	Dormant	Mexico
Fortumo OU (100%)	Fortumo Holdings Inc	Mobile payment solutions	Estonia
Fortumo Mobile Payments S.L (100%)	Fortumo OU	Mobile payment solutions	Spain
Fortumo Mobile Services (100%)	Fortumo OU	Mobile payment solutions	India
Fortumo Singapore Pte. Ltd (100%)	Fortumo OU	Mobile payment solutions	Singapore
Boku Network Services PE S.A.C. (100%)	Boku Network Services Inc. (Delaware)	Dormant	Peru
Boku Network Services CO S.A.S. (100%)	Boku Network Services Inc. (Delaware)	Dormant	Columbia
Boku Network Services CL S.P.A. (100%)	Boku Network Services Inc. (Delaware)	Dormant	Chile
Boku Network Services ZA (Pty) Ltd (100%)	Boku Network Services Inc. (Delaware)	Dormant	South Africa
Boku Network Services KE Limited (100%)	Boku Network Services Inc. (Delaware)	Dormant	Kenya

 

13.          Trade and other receivables

		31 December	31 December
		2021	2020
		$'000	$'000
Trade receivables - gross		28,072	28,087
Accrued income		51,290	59,596
Accounts receivable - gross		79,362	87,683
Less: provision for impairment		(756)	(1,322)
Accounts receivable - net		78,606	86,361
Other receivables		30	190
Deposits held		454	749
Sales taxes receivable		1,268	1,339
Financial asset		-	2,160
Deferred cost of sales		-	256
Prepayments		2,199	1,480
Total trade and other receivables		82,557	92,535

 

Provision for receivables impairment

			31 December		31 December
			2021	2020
			$'000	$'000
Opening balance			1,322	2,001
Utilised during the period			(36)	(25)
Decrease during the period			(1,137)	(705)
Foreign exchange movement			-	51
Closing balance			149	1,322

 

In accordance with IFRS9, the Group reviews the amount of credit loss associated with its trade receivables based on forward looking estimates that take into account and forecast credit conditions as opposed to relaying on past default rates. The Group has applied the Simplified Approach, applying a provision matrix based on the number of days past due to measure lifetime expected credit losses and after taking into account customer sectors with different credit risk profiles and current and forecast trading conditions.

 

14.  Cash and cash equivalents and restricted cash

		31 December 2021	31 December 2020 restated
		$'000	$'000
Cash and cash equivalents - unrestricted cash		56,651	61,290
Cash and cash equivalents - restricted cash		5,789	1,414
		62,440	62,704

 

The restricted cash primarily includes e-money and other client money received but not yet paid to merchants (in transit).

In the prior year restricted cash was excluded from cash and cash equivalents in presenting the cashflow statement. Having considered the nature of this asset, the company determined that despite the restrictions it should be presented as part of cash and cash equivalents, and the prior year casflow has been restated accordingly.

15.   Lease liabilities 

Details of lease liabilities as at 31 December 2021, which includes the addition of two new leases in the year, for the Group's new offices in San Francisco, U.S. and Tallin, Estonia:

 

Lease liabilities	Property	IT Equipment	Total
1st Jan 2020	2,377	704	3,081
Additions	2,142	-	2,142
Interest expense Payments to lease creditors	229             (1,834)	63                          (503)	292            (2,337)
Lease liabilities as at 31 Dec 2020	2,914	264	3,178
Additions	3,114	-	3,114
Interest expense	227	8	235
Payments to lease creditors	(1,422)	(272)	(1,694)
Lease liabilities as at 31 Dec 2021	4,833	-	4,833

 

The maturity analysis for lease liabilities is presented below:

 

Lease liabilities - Maturity analysis (contractual undiscounted cash flows) - $'000 (USD)	2021	2020
Less than one year	1,477	1,625
One to five years	3,868	1,937
More than five years	-	-
Total undiscounted lease liabilities as at 31 December	5,345	3,562

 

There are no leases with a term of more than 5 years

Lease liabilities included in the statement of financial position at 31 December  - $'000 (USD)		2021	2020
Current		1,335	1,436
Non-current		3,498	1,742
Amounts recognised in profit or loss- $'000 (USD)		2021	2020
Interest on lease liabilities		235	292
Variable lease payment not included in the measurement of lease payments		-	-
Expenses related to short term leases		26	22
Expenses related to leases of low-value assets, excluding short-term leases of low-value assets		14	21
Depreciation of right-of-use assets (Note 10)		1,879	2,121

 

The amounts recognised in the Consolidated Statement of Cashflows are presented below:

 

Amounts recognised in the statement of cashflows- $'000 (USD)	2021	2020
Payment of principal	1,694	2,045
Payment of interest	235	292
Total cash outflows	1,929	2,337

 

16. Trade and other payables

		31 December	31 December
		2021	2020
Current		$'000	$'000
Trade payables		94,152	105,376
Accruals		23,375	28,135
Total financial liabilities classified as financial liabilities measured at amortised cost		117,527	133,511
Other taxes and social security costs		788	1,353
Accrued tax on issued stock options		1,022	1,466
Other payables		-	5
Deferred revenue		304	444
Total		119,641	136,779
Non-current
Accrued taxes on issued stock options		1,700	862
Total		1,700	862

 

The carrying values of trade and other payables approximate to fair values.

 

17. Loans and borrowings

		31 December	31 December
		2021	2020
		$'000	$'000
Current
Bank loans and overdrafts (secured)		1,125	1,438
Lease liabilities		1,335	1,436
Total		2,460	2,874
Non-current
Bank loans		6,688	10,813
Lease liabilities		3,498	1,742
Total		10,186	12,555

 

Principal terms and the debt repayment schedule of the Group's loan and borrowings are as follows:

On 26 June 2020 the Group entered into a loan agreement with its bankers for $20.0 million to finance the acquisition of Fortumo Holdings Inc, and its subsidiaries on 1^st July 2020. The loan was structured as a $10.0 million term loan repayable in 4 years and $10.0 million revolving facility. The revolving facility was paid down in full by 31 December 2021. Borrowing costs of $500,000 were incurred and are amortised over the life of the loan.

After year end the Identity division was sold to Twilio. The outstanding term loan with Citibank of $8.125 million was repaid in full from the deal consideration, as part of the closing conditions, on 28th February 2022.

Reconciliation of liabilities arising from financing activities
	2020	Cash flows	Non-cash changes ($'000)			2021
	$'000	$'000	Borrowing costs expensed in the year	Foreign Exchange Movement	Lease Liabilities (IFRS 16)	$'000
Short-term borrowings	1,438	(313)	-			1,125
Long-term borrowings	10,813	(4,250)	125			6,688
Short-term lease liabilities	1,436	(1,929)	-	(10)	1,838	1,335
Long-term lease liabilities	1,742	-	-	(40)	1,796	3,498
Total liabilities from financial activities	15,429	(6,492)	125	(50)	3,634	12,646
	2019	Cash flows	Non-cash changes ($'000)			2020
	$'000	$'000	Converted to shares	Foreign Exchange Movement	Lease Liabilities (IFRS 16)	$'000
Short-term borrowings	2,098	(563)	-	(97)	-	1,438
Long-term borrowings	-	10,813		-	-	10,813
Short-term lease liabilities	1,723	(2,337)	-	(18)	2,068	1,436
Long-term lease liabilities	1,358	-	-	-	384	1,742
Total liabilities from financial activities	5,179	7,913		(115)	2,452	15,429

 

18. Share capital

The Company's issued share capital is summarised in the table below:

				31 December			31 December
				2021			2020
			Number of shares issued and fully paid '000		$'000	Number of shares issued and fully paid '000		$'000
Common stock of $0.0001 each
Opening balance			287,566		29	252,335		25
Exercise of options and RSUs			6,751		-	23,600		3
Shares issued to Danal Shareholders			-		-	2,724		1
Shares issued to Fortumo Shareholders			1,559		-	8,907		-
Closing balance			295,876		29	287,566		29

 

Common Stock

At December 31, 2021, the Company had 295,876,395 (2020: 287,566,248) common shares issued and outstanding.

19. Reserves

 

The share premium disclosed in the consolidated statement of financial position represents the difference between the issue price and nominal value of the shares issued by the Company. It includes all stock options expenses reserves.

Retained losses are the cumulative net profits / (losses) in the consolidated income statement.

Foreign exchange reserve stores the foreign exchange translation gains and losses on the translation of the financial statements from the functional to the presentation currency.

Movements on these reserves are set out in the consolidated statement of changes in equity.

20. Share-based payment

 

The Group operates the following equity-settled share-based remuneration schemes for employees, directors and non-employees:

1.

2009 equity incentive plan (2009 Plan) for the granting of stock options (incentive or non-qualified), restricted stock awards (RSA) and restricted stock units (RSU). No options were available to be issued under this plan as at 31 December 2021 or 2020.

2.

2017 Equity Incentive Plan (new plan started on the 7th November 2017) for the granting of stock options and restricted stock units (RSUs). The Group reserved an initial ten million shares of common stock for issue under the plan.  The activity under this plan is presented separately from the rest of the plans.  There are 969 options (2020: 1,112) and 10,454 (2020: 8,962) RSUs outstanding as at 31 December 2021.

 

Options under the 2009 Plan

Options under the 2009 Plan and UK plan may be outstanding for periods of up to ten years following the grant date.  Outstanding options generally vest over four years and may contain a one-year cliff, where 25% of the options vest. Stock options with graded vesting is based on the graded vesting attribution approach, whereby, each instalment of vesting is treated as a separate stock option grant, because each instalment has a different vesting period.

RSUs under the 2017 Plan

RSUs under the 2017 Plan may be outstanding for periods of up to five years following the grant date.  Outstanding RSU grants generally vest over three years in three equal portions or one third after two years and two thirds in the third year anniversary from the grant date.

Performance-based restricted stock units (RSU)

Performance-based RSUs vest upon the earlier of the completion of a specified service period and the achievement of certain performance targets, which may include individual and Company measures, and are converted into common stock upon vesting.

Share-based expense for RSUs is based on the fair value of the shares underlying the awards on the grant date and reflects the estimated probability that the performance and service conditions will be met; specifically, where the restricted stock units are nil-cost awards with a non-market performance condition, so they are valued at the share price as at the day of grant. The share-based expense is adjusted in future periods for subsequent changes in the expected outcome of the performance related conditions until the vesting date. Performance-based RSUs vest after three years of issue, in one event, if the performance conditions are met, however these may also vest at the discretion of the board in the event that underlying performance conditions are not met.

Options under the 2009 Plan and 2009 UK plan

Options under the 2009 Plan and UK plan may be outstanding for periods of up to ten years following the grant date.  Outstanding options generally vest over four years and may contain a one-year cliff, where 25% of the options vest.

Stock options with graded vesting is based on the graded vesting attribution approach, whereby, each instalment of vesting is treated as a separate stock option grant, because each instalment has a different vesting period.

The options activity under the 2009 Plan (including  RSUs) are as follows:

	Available 2009 Plan	2009 Plan (Options)		2009 Plan RSUs)	Total
	Number of options	Number of options	WAEP1	Number of RSUs	Number of options
	'000	'000		'000	'000
At 1 January 2020		15,693	$0.268	157	15,850
Exercised	-	(5,224)	$0.346	(157)	(5,381)
Cancelled	-	(2,163)	$0.281	-	(2,163)
At 31 December 2020	-	8,306	$0.327	-	8,306
Exercised	-	(3,509)	$0.341	-	(3,509)
Cancelled	-	(44)	$0.283	-	(44)
At 31 December 2021	-	4,846	$0.340	-	4,753

¹WAEP - weighted average exercise price

*RSUs are always granted at zero exercise price

2009 Plan		December 2021	December 2020
Outstanding options at reporting end date:
- total number of options (including  RSU)		4,846	8,399
- weighted average remaining contractual life (all except 2017 Plan, and excluding RSUs) (years)		3.75	4.43
- weighted average remaining contractual life - RSU (years)		-	-
Vested and exercisable ('000):		4,846	8,275
- weighted average exercise price		$0.416	$0.384
- weighted average remaining contractual life - all plans           (excluding RSU )		3.75	4.4
Weighted average share price exercised during the period (excluding RSUs)		$0.34	$0.35
Weighted average fair value of each option granted during the period (excluding RSUs)		-	-
Vested and exercisable - RSUs		-	-
Share-based expense for the period ('000)		$2	$24

 

The following information is relevant in the determination of the fair value of options (excluding RSUs) granted during the period under the equity- settled share-based remuneration schemes operated by the Group.

2009 Plan		December 2017
Option pricing model used		Black-Scholes
Weighted average share price at grant date (dollar)		$0.370
Exercise price (options only)		$0.370
Weighted average contractual life (years)1		5.82(E*+ NE*)
Weighted expected volatility 2		45% (E*+ NE*)
Expected dividend growth rate		0%
Weighted average Risk-free interest rate3		1.9% (E*+ NE*)

 

¹Weighted average contractual life represents the period of time options are expected to be outstanding and is estimated considering vesting terms and employees' historical exercise and post-vesting employment termination behavior.

²Expected volatility is based on historical volatilities of public companies operating in the Company's industry.

³The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant.

*E - employees NE - non-employees

The fair value of each option (excluding RSUs) has been estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions: expected terms ranging from 4.99 to 6.89 years; risk-free interest rates ranging from 0.73% to 3.05%; expected volatility of 58%; and no dividends during the expected term (2017: expected terms ranging from 5.04 to 6.01 years; risk-free interest rates ranging from 1.87% to 1.92%; volatility of 45%; and no dividends during the expected term).

The options activity under the 2017 Plan (including options and RSU) are as follows:

	Options available	Options	WAEP1	RSUs	WAEP1	Total
	'000	'000		'000		'000
At 1 January 2020	19,545	1,281	$1.205	7,888	-	9,169
Authorised	11,163	-	-	-		-
Granted	(6,393)	-	-	6,393	-	6,393
Exercised	-	(39)	$1.205	(1,918)	-	(1,957)
Cancelled	3,402	(130)	$1.205	(3,402)	-	(3,531)
At 31 December 2020	27,717	1,112	$1.205	8,961	-	10,073
Authorised	12,312	-	-	-	-	-
Granted	(5,739)	-	-	5,739	-	5,739
Exercised	-	(107)	$1.205	(3,135)	-	(3,242)
Cancelled	1,111	(36)	$1.205	(1,111)	-	(1,147)
At 31 December 2021	35,401	969	$1.205	10,454	-	11,423

 

2017 Plan		December 2021	December 2020
Outstanding options at reporting end date:
- total number of options (excluding  RSUs) ('000)		969	1,112
- weighted average remaining contractual life           (excluding RSUs) (years)		6.02	6.91
- weighted average remaining contractual life - RSUs (years)		5.85	6.85
Vested and exercisable ('000):
- weighted average exercise price		$1.205	$1.205
- weighted average remaining contractual life           (excluding RSU) (years)		6.02	6.91
Weighted average fair value of options granted during the period (excluding RSU)		$0.44	$0.44
Vested and exercisable - RSUs		924	793
Share-based expense for the period ('000)		$5,682	$4,920

 

The following information is relevant in the determination of the fair value of options (excluding RSU's) granted during the period under the equity- settled share-based remuneration schemes operated by the Group. Only RSUs were granted in 2021 and 2020.

2017 Plan		December 2018
Option pricing model used		Black-Scholes
Weighted average share price at grant date (dollar)		$1.205
Exercise price (options only)		$1.205
Weighted average contractual life (years)1		9.05 years
Weighted expected volatility 2		32.66%
Expected dividend growth rate		0%
Weighted average Risk-free interest rate3		2.49%

 

¹Weighted average contractual life represents the period of time options are expected to be outstanding and is estimated considering vesting terms and employees' historical exercise and post-vesting employment termination behavior.

²Expected volatility is based on historical volatilities of public companies operating in the Company's industry. 

³The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant.

Warrants for ordinary shares

A five year warrant to purchase 1,634,699 Boku shares at an exercise price of $1.8352 USD per share, exercisable at any time during the 5-year term was issued as part of the Danal acquisition, on 1^st January 2019. This warrant was valued using the Binomial Lattice Model using the following inputs:

	a) Term: 5 years
	b) Starting share price: $0.8982 USD
	c) Expected Annual Volatility: Used 5-year comparable companies equity volatilities from Capital IQ (26.6%)
	d) Risk Free Rate: Five-year US risk-free rate (2.51%)
	e) Strike Price: $1.8352 USD

 

Using the inputs above the warrant was valued at $94,606 USD and accounted as part of the purchase consideration as an equity instrument and credited to other reserves until such time when it is exercised when it will be reclassified to the share premium account.

Reconciliation of share-based payment expense

	December 2021 $000's	December 2020 $000's
2009 Plan
Options	2	23
RSU's	-	-
2017 Plan
Options	25	154
RSU's	5,657	4,136
Total share-based expense (excluding national insurance)	5,684	4,313
National insurance accrued	423	159
National insurance paid in the year (see Note 4)	1,284	453
Total share-based payment charge	7,391	4,925

 

In the current year, a board resolution was passed to amend the 2018, 2018 and 2020 GMC LTIP RSU Grants. The EPS target has changed to be measured as an average EBITDA per share over 3 years (previously a performance target of an EBITDA amount).

The change has resulted in the increase in the probability of the targets being met from 80% to 100% likelihood and this had resulted in a cumulative adjustment recognised as an expense in the current year of $582k for the 2018, 2019 and 2020 LTIP plan

21. Dividends

 

No dividends were declared or paid in any of the periods.

22. Cash generated from operations

		Year ended 31 December	Year ended 31 December
		2021	2020
		$'000	$'000
Profit/(loss) after tax		6,269	(18,785)
Add back:
Tax (credit)/expense		(1,882)	1,470
Amortisation of intangible assets		5,232	3,471
Depreciation of property, plant and equipment		2,255	2,446
Restructuring write-offs		-	158
Loss/(profit)on disposal of property, plant and equipment		5	-
Finance income		(22)	(70)
Finance expense (includes interest on lease liabilities)		770	662
Exchange loss/(gain)		743	(3,130)
Employer taxes on stock option (accrual)		423	159
Impairment of goodwill		-	20,775
Share based payment expense		5,684	4,313
Cash from operations before working capital changes		19,477	11,469
Decrease/(Increase) in trade and other receivables		8,748	(9,545)
(Decrease)/Increase in trade and other payables		(15,863)	29,605
Cash generated from operations		12,362	31,529

 

23. Related party transactions

In 2021, the Group was remitted $123,776,087 in net payments from five suppliers who are shareholders of the Company (2020: $100,206,645 - from five suppliers). At 31 December  2021, the Company had receivables of $15,767,393 (2020: $12,404,487) due from these companies.

 24. Ultimate controlling party

There is no ultimate controlling party of the Company.

25. Contingent liabilities

In the normal course of business, the Group may receive inquiries or become involved in legal disputes regarding possible patent infringements. In the opinion of management, any potential liabilities resulting from such claims, if any, would not have a material adverse effect on the Group's consolidated statement of financial position or results of operations.

From time to time, in its normal course of business, the Group may indemnify other parties, with whom it enters into contractual relationships, including customers, Aggregators, MNOs, lessors and parties to other transactions with the Group. The Company has also indemnified its directors and executive officers, to the extent legally permissible, against all liabilities reasonably incurred in connection with any action in which such individual may be involved by reason of such individual being or having been a director or executive officer. The Group believes the estimated fair value of any obligation from these indemnification agreements is minimal; therefore, this consolidated financial information do not include a liability for any potential obligations at 31 December 2021 and 2020.

26. Post balance sheet events

After the year end an agreement was reached with Twilio, Inc. ("Twilio"), the leading cloud communications platform, to acquire Boku's Identity division comprising its wholly-owned subsidiary Boku Identity, Inc., as announced on 19 January 2022, for a maximum consideration of $32.3 million payable in cash and the transaction was closed on 28 February 2022.

The Russia/Ukraine conflict that started in early 2022 impacted Boku's connections to Russian carriers in its network as detailed in the CFO report. However Boku operates in 91 countries and the impact on 2022 revenues is not expected to exceed 2% of 2022 revenues.

27. Cautionary Statement

 This document contains certain forward-looking statements relating to Boku Inc (the "Group"). The Group considers any statements that are not historical facts as "forward-looking statements". They relate to events and trends that are subject to risk and uncertainty that may cause actual results and the financial performance of the Company to differ materially from those contained in any forward-looking statement. These statements are made by the Directors in good faith based on information available to them and such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forward-looking information.