Sinch Ab · OMXSTO:SINCH
Sinch Ab — Q2 2020 Earnings Presentation
30 slides from Sinch Ab's earnings presentation, Jul 17, 2020
Slide 1: Q2 2020 Investor Presentation
Q2 2020 Investor Presentation 17 July 2020 Oscar Werner CEO Roshan Saldanha CFO Thomas Heath Chief Strategy Officer & Head of Investor Relations
Slide 2: Sinch at a glance
SEK 6.0bn SEK 708m SEK 45bn 822 37 countries with revenue in the Adj. EBITDA in the Market Cap people local presence past 12 months past 12 months 40 billion Publicly listed on Customer engagement through mobile technology engagements per year NASDAQ in Stockholm Scalable cloud communications Servin
Slide 3: Track record of profitable growth
Track record of profitable growth 3,500 3,000 ACL • Focus on Gross profit since pass- 2,500 through revenues vary between geographies SEK million SDI 2,000 1,500 Wavy • 43% growth in Gross profit and Synergies 55% growth in EBITDA in Q2 20 1,000 ACL SDI • Acquisitions of Wavy, SDI and 500 ACL Mobile
Slide 4: 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 for A2P SMS
Slide 5: Playbook for profitable growth
Playbook for profitable growth • Empower businesses to leverage rich and conversational messaging Software- • Increase our software value-add (CPaaS) in addition to our connectivity offering as-a-Service • Increase stickiness with maintained scalability • Ensure leading direct global connectivity wi
Slide 6: Strategic acquisitions
Strategic acquisitions Founded as CLX Networks IPO One brand 2016 2017 2018 2019 2020 2008 Technology & Innovation Go To Market Voice, video, Personalized Rich messaging, Conversational AI Next-generation verification video Low code tools messaging SAP Digital Scale and Interconnect SMS profitabilit
Slide 7: Customer case: Driving engagement for Nationwide
Customer case: Driving engagement for Nationwide Nationwide objectives • Nationwide Payment holidays eases customers’ burden during covid-19 • Looking for ways to improve the customer experience • Email has low open rates and sending physical mail a slow process Sinch value proposition Your postcode
Slide 8: Deal rationale: SAP Digital Interconnect
Deal rationale: SAP Digital Interconnect • Global cloud communications provider with operations in Americas, Europe and Asia Pacific SAP Digital • Programmable Communications (67% of revenue), Carrier Messaging (28%), Enterprise Solutions (5%) Interconnect • 18bn business messages and 292bn person-t
Slide 9: Deal rationale: ACL Mobile
Deal rationale: ACL Mobile • Leading cloud communications provider in India and Southeast Asia • Strong customer base with leading position in Banking & Finance ACL Mobile • Significant scale with 47 billion business messages handled in the past 12 months • 288 employees in India, UAE and Malaysia •
Slide 10: India
India • 2nd largest mobile market in the world with a population exceeding 1.3 billion1 India India • 1.2 billion mobile subscribers2 and ~50% smartphone penetration • World’s highest data usage per smartphone3 at 9.8 GB/month • Rapidly digitalizing economy; second only to Indonesia4 • World’s large
Slide 11: April – June 2020
April – June 2020 • Gross profit rising 43% to SEK 460.3 million (321.1) • Adjusted EBITDA rising 55% to SEK 176.5 million (114.2) • Adjusted EBIT excl. acquisition-related amortization of SEK 161.7 million (104.1) • Profit after tax of SEK 37.1 million (53.3) • Organic Gross profit growth of 24% in
Slide 12: Key growth drivers
Key growth drivers 1. 2. 3. Volume growth & new Acquisition of TWW, Strong performance use cases with US big myElefant and in Brazil tech companies Chatlayer Growing both with new and existing customers 12
Slide 13: Four investment areas
Four investment areas Operational New Integration Organic growth efficiency technology • Continuous • COGS efficiency • Software for • TWW, myElefant & investment in • Internal automation advanced, interactive Chatlayer platform scalability for improved messaging • ACL Mobile • Supporting growth sca
Slide 14: Accelerating growth in Messaging
Accelerating growth in Messaging Messaging (SEKm) 1,800 • US tech companies continue 1,600 to fuel growth 1,400 1,200 • Rising volumes as businesses shift from email to mobile messaging 1,000 800 • myElefant & TWW included since 600 mid-October 2019, Chatlayer since 400 April 2020 200 • Investments
Slide 15: Rising message volumes
Rising message volumes Number of transactions per month (billions) • Acquisition of TWW and myElefant adding significant volumes in 4.0 October-November 2019 3.5 • Significant volume increase in 3.0 March 2020 was partly related to Covid-19 2.5 2.0 • Growth from existing customers, new customers, ne
Slide 16: Gross profit per transaction
Gross profit per transaction OPEX/transaction & Gross profit/transaction (SEK) 0.050 • Gross profit is the primary bottom line driver 0.040 • GP/transaction stable compared to 0.030 the same period last year 0.020 • Reduced Opex/transaction due to economies of scale 0.010 0.000 1 2 3 4 5 6 7 8 9 10
Slide 17: Rising margin in Messaging
Rising margin in Messaging Messaging EBITDA/Gross profit • Revenue and gross margin depend 60% on mix of terminating markets 50% • EBITDA/Gross profit shows margin excluding mobile operator charges 40% • Adding traffic volume increases 30% gross profit more than it increases 20% opex 10% • Continued
Slide 18: Covid-19 impact on Voice and Video
Covid-19 impact on Voice and Video Voice and Video (SEKm) 80 70 • Sharp decrease in demand for 60 Number masking from ride hailing 50 customers as Covid-19 reduces 40 travelling 30 • Positive underlying trends in 20 products for Number verification 10 0 • Increasing OPEX to ensure quality -10 of ser
Slide 19: Headwind in Operators
Headwind in Operators Operators (SEKm) 50 40 • Lengthened sales cycles as with lower operator investments due to 30 Covid-19 20 • Currency headwinds 10 • Investments in 5G SMSF and RCS- as-a-Service for mobile operators 0 -10 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2017 2018 2019 2020 Revenue Gros
Slide 20: Q2 2020 Financials
CA Q2 2020 Financials
Slide 21: Income statement
Income statement Q2 Q2 • Non-recurring items of SEK 30.8 SEK million 2020 2019 2019 R12M million in Q2 20 relate to Net sales 1,621.9 1,176.7 5,035.6 6,003.2 acquisitions and integration cost Cost of goods sold and services -1,161.6 -855.6 -3,641.4 -4,312.7 Gross profit 460.3 321.1 1,394.1 1,690.5 •
Slide 22: Accelerating Gross profit growth
Accelerating Gross profit growth Organic Acquisitions FX SEKm +24% +19% +1% 500 60 4 460 • 43% growth in Gross profit despite 91 -10 -5 0 headwinds in Operators and Voice 400 and Video 321 300 • 24% organic Gross profit growth 200 • 19% contribution from acquisitions 100 • Big US tech companies and
Slide 23: Headcount increase
Headcount increase +47% 794 800 744 • Headcount rising due to 700 654 recruitment and acquisitions 600 542 573 • Near-term negative effect on 500 462 469 496 EBITDA before new initiatives 441 392 412 412 420 translate into higher revenues and 366 400 gross profit 300 • Headcount at 822 at end of Q1
Slide 24: Reconciling Cash flow with EBITDA
Reconciling Cash flow with EBITDA Q2 Q2 SEK million 2020 2019 2019 R12M • Strong underlying cash generation Adjusted EBITDA 176.5 114.2 573.5 708.0 Paid interest -9.5 -6.0 -20.8 -24.6 • Delayed tax payments in the Paid taxes -6.4 -34.7 -117.4 -71.6 United States Other -33.9 0.5 18.2 -15.9 Cash flow
Slide 25: Cash flow
Cash flow Q2 Q2 SEK million 2020 2019 2019 R12M Cash flow before changes in working capital 126.7 74.0 453.5 595.9 Changes in working capital 137.0 56.2 -126.2 -38.6 Cash flow from operating activities 263.6 130.2 327.3 557.3 • Positive development in Net Net investments in fixed assets Working Capi
Slide 26: Integration process
Integration process Deal scouting Signing Closing Due diligence Integration planning Integration phase • Purchase agreement signed March 2020 • Transaction closed October 2019 • Regulatory approval process is ongoing • Platform integration ongoing • Expected to close H2 2020 • Integration planning t
Slide 27: Financial targets
Financial targets Targets: Adjusted EBITDA per share, rolling 12 months • Adjusted EBITDA per share to grow 20% per year 14.0 • Net debt < 2.5x adjusted EBITDA 12.0 over time 10.0 8.0 Performance: 6.0 • Adjusted EBITDA per share grew 57% in Q2 20, measured on a rolling 4.0 12 month basis 2.0 • Net d
Slide 28: Financial leverage
Financial leverage Pro forma net debt/Adjusted EBITDA 2.2 1.6 • Pro forma calculation includes last 12 months of Adj EBITDA for acquired entities • Financial target is to maintain Net debt < 2.5x adjusted EBITDA over -1.1 time -2.1 -2.1 • Leverage expected to decline in coming periods as EBITDA grow
Slide 29: Key priorities ahead
Key priorities ahead Continued growth with US-based, global tech companies Initiatives for broadened growth across the base Closing of pending transactions Integration planning for ACL, SDI, and Wavy Continued strengthening of our connectivity offering Investment in SaaS products for advanced, next-
Slide 30: Thanks!
Thanks! Copyright© 2019 CLX Communications AB (publ). All rights reserved. NDA Confidential. 30