Sinch Ab · OMXSTO:SINCH

Sinch Ab — Q2 2019 Earnings Presentation

22 slides from Sinch Ab's earnings presentation, Jul 19, 2019

  1. Slide 1: Q2 2019 Investor Presentation

    Q2 2019 Investor Presentation 19 July 2019 Oscar Werner CEO Roshan Saldanha CFO Thomas Heath Chief Strategy Officer & Head of Investor Relations

  2. Slide 2: Sinch at a glance

    Sinch at a glance We deliver customer engagement through mobile technology Scalable cloud communications platform for messaging, voice and video 100% consumer penetration Growing, global, multi-billion dollar market We serve 8 out of 10 of the largest US tech companies Software for mobile operators

  3. Slide 3: Growth markets

    Growth markets Messaging CPaaS Application-to-Person (A2P) messaging is used Communications Platform as a Service (CPaaS) across the world for ever-more use cases allows businesses to easily integrate messaging, voice and video services into their own applications • USD 17 bn market size (MobileSqua

  4. Slide 4: April – June 2019

    April – June 2019 • Gross profit rising 29% to SEK 321.1 million (248.6) • Adjusted EBITDA rising 17% to SEK 114.2 million (97.4) • Adjusted EBIT excl. acquisition-related amortization of SEK 104.1 million (91.2) • Profit after tax of SEK 53.3 million (29.0) • Organic Gross Profit growth of 26% in l

  5. Slide 5: Key growth drivers

    Key growth drivers 1. 2. 3. 4. Rising message Growth in New client wins in Software to volumes with large Personalized Video Voice and Video Operators US tech companies Growing both with new and existing customers

  6. Slide 6: Investment areas

    Investment areas Operational Sales and New efficiency marketing technology • COGS efficiency • New brand & strengthened • Software for advanced, • Internal automation for lead generation interactive messaging improved scalability • International expansion of • New channels like WhatsApp • Client sel

  7. Slide 7: Continued growth in Messaging

    Continued growth in Messaging Messaging (SEKm) 1,200 1,000 • Rising message volumes 800 • US tech companies fuel growth 600 • High demand for personalized video 400 • Investments in next-generation 200 messaging 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2017 2018 2019 Revenue Gross Profit EBITDA 7

  8. Slide 8: Rising message volumes

    Rising message volumes Number of transactions per month (billions) 2.2 2.0 • Growth with existing customers, 1.8 new customers, new use cases 1.6 1.4 • 7% organic growth in transactions 1.2 1.0 • 22% organic growth in Gross Profit 0.8 0.6 0.4 0.2 0.0 1 2 3 4 5 6 7 8 9 101112 1 2 3 4 5 6 7 8 9 101112

  9. Slide 9: Gross profit per transaction

    Gross profit per transaction OPEX/transaction & Gross profit/transaction (SEK) 0.050 0.040 • Gross profit is the primary bottom line driver 0.030 • GP/transaction rising due to 0.020 personalized video, currency tailwind and increased traffic to 0.010 profitable markets 0.000 1 2 3 4 5 6 7 8 9 10 11

  10. Slide 10: OPEX investments to capture growth

    OPEX investments to capture growth Messaging EBITDA/gross profit 60% 50% • Revenue and gross margin depend on mix of terminating markets 40% • EBITDA/gross profit shows margin 30% excluding mobile operator charges 20% • Growth initiatives weigh on 10% profitability before they translate into revenue

  11. Slide 11: High growth in Voice and Video

    High growth in Voice and Video Voice and Video (SEKm) 70 60 50 • Growth fuelled by Number Masking 40 and Verification 30 • Increased OPEX to handle new customers and rising volumes 20 10 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 -10 2017 2018 2019 Revenue Gross Profit EBITDA 11

  12. Slide 12: Healthy profitability in Operators

    Healthy profitability in Operators Operators (SEKm) 60 50 • Improved conversion of orders 40 to sales 30 • Fluctuations in results as projects are realized 20 • Investments in RCS-as-a-Service 10 for mobile operators 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2017 2018 2019 Revenue Gross Profit EBITDA 12

  13. Slide 13: Q2 2019 Financials

    ore Q2 2019 Financials

  14. Slide 14: Income statement

    Income statement Q2 Q2 SEK million 2019 2018 2018 R12M Net sales 1,176.7 997.4 3,986.6 4,409.0 Cost of goods sold and services -855.6 -748.8 -2,978.2 -3,238.7 • No non-recurring items in Gross profit 321.1 248.6 1,008.4 1,170.4 EBITDA this quarter Other operating income 25.6 14.7 109.6 124.0 • Amort

  15. Slide 15: Continued high Gross Profit growth

    Continued high Gross Profit growth Organic FX +26% +3% SEKm 9 321 11 8 0 45 300 249 • 29% total Gross Profit growth 250 • 26% organic* Gross Profit growth 200 150 • Rising Gross Profit in all business units 100 50 • Big US tech companies and personalized video contribute to 0 growth in Messaging Q2

  16. Slide 16: Increasing our value-add in Messaging

    Growth rates in local currencies in comparable units. Increasing our value-add in Messaging 7% 13% 22% growth growth growth Transactions Revenues Gross Profit • Gradual shift from wholesale • Higher value per transaction • Serving more demanding to direct enterprise customers with personalized video

  17. Slide 17: Headcount increase

    Headcount increase 600 +23% 542 496 500 461 468 441 110 412 412 420 91 392 69 77 400 366 61 47 53 61 62 • Recruitment and company 300 49 acquisitions grow our headcount 200 431 • Near-term negative effect on 393 391 405 317 345 359 351 357 380 EBITDA before new initiatives 100 translate into higher

  18. Slide 18: Cash flow

    Cash flow Q2 Q2 SEK million 2019 2018 2018 R12M Cash flow before changes in XXX working capital 74.0 40.2 223.6 310.9 • Net Working Capital fluctuates Changes in working capital 56.2 169.7 81.0 -96.7 between quarters Cash flow from operating activities 130.2 209.9 304.6 214.2 and intangible assets -

  19. Slide 19: Reconciling Cash Flow with EBITDA

    Reconciling Cash Flow with EBITDA Q2 Q2 SEK million 2019 2018 2018 R12M XXX Adjusted EBITDA 114.2 97.3 367.1 431.1 Non-recurring items in EBITDA - -17.0 6.2 35.0 EBITDA 114.2 80.3 373.3 466.2 Change in provisions 2.3 -2.7 -9.4 -3.7 Net financial items -7.5 0.5 -16.5 -15.7 Capital gains, disposal of

  20. Slide 20: Financial targets

    Financial targets Targets: • Adjusted EBITDA per share to grow 20% per year Adjusted EBITDA per share, rolling 12 months • Net debt < 2.5x adjusted EBITDA over time 9.0 8.0 7.0 6.0 Performance: 5.0 4.0 • Adjusted EBITDA per share grew 3.0 41% in Q2 19, measured on a rolling 2.0 12 month basis 1.0 0.

  21. Slide 21: Future growth

    Future growth Strong pipeline with several US-based, global tech companies Larger field sales organisation Further growth in Personalized Video Further growth in Voice and Video Investment in rich media, conversational messaging, RCS and OTT chat apps to capture market growth potential

  22. Slide 22: Thanks!

    Thanks! Copyright© 2019 CLX Communications AB (publ). All rights reserved. NDA Confidential. 22

Sinch — Q2 2019 Earnings Presentation on 6ix