Boku, Inc. Annual Report and Accounts for the year ended 31 December 2020 ended 31 December theBoku, Inc. Annual Report year for and Accounts Into the Big Pond Boku, Inc. Annual Report and Accounts for the year ended 31 December 2020 Welcome Boku is building the future of mobile commerce, growing, monetising and securing transactions for billions of consumers around the world. Mobile devices are the most widely distributed consumer technology in the world today, with over five billion devices connected to a global network of operators. Boku’s platform ensures that our over 500 customers, including six of the seven most valuable companies in the world, can collect payments for digital goods and secure consumer transactions and data in every corner of the globe. Boku has integrated over 220 payment types including carrier billing and mobile wallets into its M1ST (Mobile First) Payments Network. Merchants can integrate all of these payment types through a single connection, gaining access to the billions of consumers who prefer to pay with their phone. Boku provides the most comprehensive network of mobile identity to streamline and secure valuable online transactions, delivering superior user experience and reduced instances of fraud for digital service providers, including financial institutions. To learn more about Boku, as well as obtain the latest information of interest to investors and stakeholders, please visit our website at www.boku.com Our customers Contents Strategic Report Governance Financials Chairman’s Statement .......................... 2 Board of Directors ..............................24 Independent Auditor’s Report ...........48 Strategic Report– Senior Management ...........................26 Consolidated Statement Into the Big Pond .................................. 4 Corporate Governance Report .........28 of Comprehensive Income ................56 Chief Executive Officer’s Report ...... 10 Audit Committee Report ....................34 Consolidated Statement Chief Financial Officer’s Report ........ 14 Remuneration Report .........................37 of Financial Position .......................... 57 Principal Risks and Uncertainties .....20 Directors’ Report .................................44 Consolidated Statement of Changes In Equity ..........................58 Directors’ Responsibilities Statement ............................................47 Consolidated Statement of Cash Flows......................................59 Notes to the Consolidated Financial Statement ...........................60 Highlights Strong Revenue Growth $USD millions) Adjusted EBITDA Growth $USD millions) 60 20 $56 $15 $50 15 50 10 $7 40 $6 $35 5 30 $24 0 20 $17 $2 5 10 10 $12 15 2016 2017 2018 2019 2020 2016 2017 2018 2019 2020 Billable Transactions (millions) Total Payments Volume, Payments $USD millions) Payments Identity Fortumo Boku PaymentsFortumo 50 1,000 700 * 330 600 800 170 500 600 250 400 400 300 319 682 200 486 200 159 100 68 01 06 1 6 1 6 01 06 1 6 2016 2017 2018 2019 2020 2016 2016 20170 20170 20180 20180 2019 2019 20200 20200 202101 *data not comparable to prior year due to different data collection methodology Stock code: BOKU Boku Inc Annual Report and Accounts for the year ended 31 December 2020 1 Strategic Report Chairman’s Statement For many organisations 2020 was a Boku Identity was not able to deliver the challenging year. Externally events were level of progress we had previous expected dominated by a global pandemic, but but despite negative impacts from the Boku was able to execute on its plan. pandemic and supply issues in the US, At a Group level, revenues exceeded was able to make progress with Adjusted $56 million and Adjusted EBITDA* more EBITDA losses reduced to $3.9 million. than doubled to $15.3 million, up from last year’s figures of $46.8 million** and We were pleased to welcome Charlotta $7.4 million respectively. The heart of Ginman to the Board during the year. our business is the Boku platform. This She is an experienced Non-Executive year we processed record numbers of Director, with executive experience with transactions – peaking at more than 400 Nokia. She is already contributing to each second. The platform connects the Board and has joined the Audit and more than 220 mobile wallets and Remuneration Committees, allowing me network operators for both payment and to step back, in line with best corporate identity services to Boku’s customers, governance practices. I also wish to thank including many of the world’s largest the other Non-Executive Directors, Stewart companies. Roberts, who chairs the Audit Committee and Richard Hargreaves who chairs the The core Direct Carrier Billing (“DCB”) Remuneration committee, for the service on business performed strongly during the year. As more the Board and contribution to the Company during the year. people stayed at home during the pandemic, demand for home entertainment increased and Boku benefited, In 2021, a key focus of the Company’s management is to pushing up the value processed through the system in operationalise and scale our mobile wallet business. We have 2020 to just under $7 billion, 38% up on 2019. New users made a promising start with some big wins with important recruited in 2020 reached a new record as well at $25.9 customers. Boku is well positioned to leverage these early million across our Payments and bundling programmes. successes as we build Boku into a mainstream, fintech Adjusted EBITDA for the Payments division increased to payment platform specialising in next-generation Payments. $19.2 million. Mark Britto In 2020, Boku acquired Fortumo, the second most Non-Executive Chairman profitable DCB company behind Boku, which sells on a 15 March 2021 global scale. The transaction was well received by the *Adjusted EBITDA Earnings before interest, tax, depreciation and market and has performed in line with expectations, amortisation, impairment of goodwill, non-recurring payment revenue, stock option expenses, forex gains/losses and exceptional items – see contributing $4.5 million of revenue and $1.5 million of Consolidated Statement of Comprehensive Income. Adjusted EBITDA in the six months to 31 December, during ** 2019 comparative revenue excludes $3.3 million of non-recurring which their figures were consolidated. payments revenue to better reflect underlying performance 2 Boku Inc Annual Report and Accounts for the year ended 31 December 2020 www.boku.com Strategic Report Strategic Report - Into the Big Pond It’s a feeling that everyone can recognise: the knot in The Foundations: your stomach the first day that you go to big school. Excitement mixed with trepidation. In your old school, Direct Carrier Billing – Strong and Growing you were the top of the tree, the big fish; in the new Because DCB is expensive compared to other payment school you’re the small fish, trying to make your way methods, it earns its corn by recruiting new users for its in a bigger pond. Boku too is a company in transition, customers. This is an imperative for the biggest digital building on its market leadership in one sector to enter a companies in the world. As entertainment increasingly new and bigger market. becomes digital, app stores, music, video streaming and games companies are fighting to acquire new customers In 2020, Boku cemented its leadership in Direct Carrier and look to a partner like Billing (‘DCB’) with 38% organic growth in the value Boku to help them do so. Our processed through our platform, supplemented by the We have super simple, frictionless, one acquisition of Fortumo, the second most profitable tap to register products have company in the market (after Boku). We also started to successfully built a customer base that expand beyond the bounds of DCB. We are at an inflection includes all the digital giants: point: going from being the leading provider in the DCB helped our Apple, Amazon, Microsoft, niche to become a mainstream Payments fintech which merchants to Facebook, Sony, Spotify, specialises in mobile-native next-generation payments. recruit more Netflix and many more. They In 2021 and beyond, we will continue in this direction: no use us because we deliver: longer constrained by the limits of putting charges onto than 50 million over the past two years we phone bills, we will expand out of the 5% of e-commerce have successfully helped our that is digital content into non-digital sectors with a new users merchants to recruit more carefully curated set of local payment methods. In years than 50 million new users. to come, if we execute successfully, over time, this new market will be many times bigger than our existing DCB business. 4 Boku Inc Annual Report and Accounts for the year ended 31 December 2020 www.boku.com Dealing with global companies is a core strength of Boku. It The average merchant on the Boku platform is connected is hard to think of any other company which simultaneously to 32 out of the 204 carriers connected to its platform. For serves six of the seven most valuable companies in the sure, not all carriers are the same size and scale and there world. This gives us scale and scale is important. Over the is a tendency to activate the most lucrative connections last decade, Boku has established a high-quality network first, nevertheless, this raw of connections to more than 200 mobile network operators. Boku statistic gives an accurate Replicating this network is hard – carriers are choosy sense that there is a lot about which companies get the ability to add charges simultaneously of growth left in the DCB to their customers’ bills and only grant this privilege to business. We have plenty of organisations through which they can make a return. Put serves six growth to come, plenty of simply, we have the carrier connections because we have of the seven white space into which we the merchants and we recruit new merchants because we can expand. have the carrier connections. most valuable This growth is easily It is this market position that has allowed Boku to triple its companies in accommodated by the Boku payment revenues from $17.2 million to $51.2 million over Platform.