Sinch Ab · OMXSTO:SINCH
Sinch Ab — Q1 2020 Earnings Presentation
30 slides from Sinch Ab's earnings presentation, Apr 29, 2020
Slide 1: Q1 2020 Investor Presentation
Q1 2020 Investor Presentation 29 April 2020 Oscar Werner CEO Roshan Saldanha CFO Thomas Heath Chief Strategy Officer & Head of Investor Relations
Slide 2: Sinch at a glance
SEK 5.6bn SEK 646m SEK 26bn 766 33 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: Adapting to Covid-19
Adapting to Covid-19 “In response to uncertainty around Covid-19, Sinch management has initiated a range of precautionary initiatives to protect employees and ensure maintained service delivery in all circumstances.” 9 Knowledge Sinch coronavirus (COVID-19) | Q&A In these challenging times, Sinch is
Slide 4: Maintaining our financial flexibility
Maintaining our financial flexibility hes! “On 26 March, Sinch has resolved on a directed new share issue of 5,000,000 shares at a subscription price of SEK 300 per share. The directed new share issue generated a large interest and has been carried out to selected Swedish and international instituti
Slide 5: Organic and acquired growth
Organic and acquired growth Sinch Gross Profit and Adj EBITDA (SEKm) 500 450 400 * Focus on Gross profit and EBITDA 350 since pass-through revenues vary 300 between geographies a * Track record of profitable growth 150 + 54% growth in gross profit and 64% 100 growth in EBITDA in Q1 20 50 0 Qi a2 a3
Slide 6: Growth markets
Growth markets (oe) Messaging Application-to-Person (A2P) messaging is used across the world for ever-more use cases « USD 17 bn market size for A2P SMS (MobileSquared), other estimates vary between USD 15-50 bn « Business usage of SMS continues to grow * >100% growth rates expected in business mess
Slide 7: Playbook for profitable growth
Playbook for profitable growth Software- as-a-Service Empower businesses to leverage rich and conversational messaging Increase our software value-add (CPaaS) in addition to our connectivity offering Increase stickiness with maintained scalability Ensure leading direct global connectivity without mi
Slide 8: Strategic acquisitions
Strategic acquisitions (oe) sinch Founded as CLX Networks IPO One brand t t 2016 2017 2018 2019 b cietaiaieiataiatel + 2 o—_+—_*- + 2 + 2008 | | | Technology & Voice, video, verification Go To Market | XURA USA, Germany, Western Europe @ vehicle \ Qury Elefant Mi chatlayer.ai Central Europe WAVY. Pe
Slide 9: Deal rationale: Chatlayer
Deal rationale: Chatlayer Founded in 2018 Cloud-based software platform to build high-performing chat- and voicebots in multiple languages Custom Al for superior Natural Language Understanding Team of 17 people in Antwerp, Belgium Chatlayer "Technology and Go To Market”-type acquisition to strengthe
Slide 10: Conversational AI vs first-generation chatbots
KD Welcome to KD Insurance. Hi! I’m KDbot at KD Insurance! 13:35 Select your option: I can help you with all your Reply for Home insurance Adding intelligence insurance questions! Reply for Auto insurance 13:35 First-generation to messaging Reply for Life insurance Conversational AI uses chatbots us
Slide 11: Deal rationale: Wavy
Deal rationale: Wavy Wavy Deal rationale Integration Financials Leading SMS messaging provider in Latin America, second largest in Brazil Conversational messaging business growing >200 percent through innovation & use of new channels High WhatsApp volumes, customers using Apple Business Chat, RCS an
Slide 12: Use case: Customer care through WhatsApp
Use case: Customer care through WhatsApp WUAVY Conversational messaging for Ingresso Rapido, the leading ticket sales and event management company in Brazil. Challenge Large number of incoming calls to contact center with 20k tickets per month + Very complex to scale support teams with maintained qu
Slide 13: January - March 2020
January - March 2020 Gross profit rising 54% to SEK 446.7 million (289.5) Adjusted EBITDA rising 82% to SEK 184.3 million (112.2) Adjusted EBIT excl. acquisition-related amortization of SEK 168.8 million (102.3) Profit after tax of SEK 96.4 million (57.8) Organic Gross profit growth of 42% in local
Slide 14: Key growth drivers
Key growth drivers 3. Acquisition of TWW Project completions in and myElefant Operator business Volume growth & new use cases with US big tech companies Growing both with new and existing customers
Slide 15: Organic growth
Organic growth Continuous investment in platform scalability Supporting growth with existing customers Greater focus on lead gen and new sales Four investment areas Operational efficiency COGS efficiency Internal automation for improved scalability Client self-service tools New technology Software f
Slide 16: Accelerating growth in Messaging
Accelerating growth in Messaging Qi Messaging (SEKm) Q2 Q3 Q4})Q1 Q2 Q3 Q4} Qi Q2 Q3 Q4] Qi ™Netsales M@Gross profit M EBITDA Rising message volumes US tech companies continue to fuel growth Businesses shifting from email to mobile messaging myElefant & TWW included since mid-October 2019 Investment
Slide 17: Rising message volumes
Rising message volumes Number of transactions per month (billions) aids onificant vlamering 4.0 October-November 2019 3.5 * Significant volume increase in 3.0 March 2020 is likely to be partly related to Covid-19 2.5 20 * Growth from existing customers, new customers, new use cases 15 10 * 60% growt
Slide 18: 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 decline due to 0.030 traffic mix and inclusion of TWW 0.020 * Opex/transaction increase due to ° seasonal opex pattern 0.010 0000 alaselaolobdite
Slide 19: Stable margin in Messaging
Stable margin in Messaging 60% 50% 40% 30% 20% 10% 0% Messaging EBITDA/Gross profit WWV\ [MAIS iTalolalslslaelobd uh 2017 Talolalslellelolduh 2018 | ilalalalslelalelohdid 2019 | Tals 2020 Revenue and gross margin depend on mix of terminating markets EBITDA/Gross profit shows margin excluding mobile
Slide 20: Covid-19 impact on Voice and Video
Covid-19 impact on Voice and Video Voice and Video (SEKm) Q1_Q2.__Q3__Q4] Qi Q2.__Q3__Q4} Qi_Q2__Q3 2019 ™Netsales M™Gross profit M EBITDA Growth fuelled by Number Masking and Verification Decreased demand for Number Masking from ride hailing customers as Covid-19 reduces travelling Increasing OPEX
Slide 21: Return to profitability in Operators
Return to profitability in Operators Operators (SEKm) Qi Q2 Q3 Q4/Q1 Q2 a3 a4 2018 ™ Net sales ™@Gross profit M EBITDA Fluctuations in results as projects are realized Previously delayed projects successfully completed in Q1 20 Investments in 5G SMSF and RCS- as-a-Service for mobile operators CA 2
Slide 22: Financials
CA Q1 2020 Financials
Slide 23: Income statement
Income statement ai ai . . SEK million 2020 2019-2019 -—«R12M ° Non recurring items of SEK 9.1 Net sales 1,624.2 1101.8 5,035.6 5,558.0 mi fon n Q di ‘ € ati t Cost of goods sold and services 1,177.5 -812.3 -3,641.4 -4,006.7 acquisitions and integration cos Gross profit mac 2805 13944 1.5513 + Amort
Slide 24: Accelerating Gross Profit growth
Accelerating Gross Profit growth Organic Acquisitions FX SEKm +36% +15% — +4% ee ° 42 "1 447 100 9 4 5 OO my + 54% total Gross Profit growth oe 289 | * 36% organic Gross Profit growth 250 * 15% contribution from acquisitions 200 150 * Big US tech companies and 100 acquisitions fuelling growth “ * SE
Slide 25: Headcount increase
Headcount increase Q2 2018 ™@ Average number of employees ™ Average number of consultants +50% Headcount rising due to recruitment and acquisitions Near-term negative effect on EBITDA before new initiatives translate into higher revenues and gross profit Headcount increase in Q1 similar to Q4 exclud
Slide 26: Reconciling Cash Flow with EBITDA
Reconciling Cash Flow with EBITDA {e}] {e}] SEK million 2020 2019 2019 R12M Adjusted EBITDA 184.3 112.2 573.5 645.6 Paid interest -6.9 6.6 -20.8 721.4 Paid taxes -3.0 -20.6 -117.4 -99.9 Other 11 0.8 18.2 18.5 Cash flow before changes in working capital 175.6 85.9 453.5 543.2 Cash flow before changes
Slide 27: Cash flow
Cash flow ai Qi SEK million 2020 2019 2019 R12M Cash flow before changes in working capital 175.6 85.9 453.5 543.2 Changes in working capital -40.9 -47.8 -126.2 -119.3 Cash flow from operating activities 134.7 38.0 327.3 423.9 Net investments in fixed assets and intangible assets -20.0 -7.6 -56.0 -6
Slide 28: Financial targets
Financial targets Targets: Adjusted EBITDA per share, rolling 12 months * Adjusted EBITDA per share to grow 20% per year 140 + Net debt < 2.5x adjusted EBITDA 12.0 over time 10.0 8.0 Performance: 6.0 + Adjusted EBITDA per share grew 4.0 52% in Q1 20, measured ona rolling 20 12 month basis 0.0 Net de
Slide 29: Future growth
Future growth CA Strong pipeline with several US-based, global tech companies Enterprises shifting from mail to messaging Larger Sinch field sales organisation, strengthened marketing M&A Continued strengthening of our connectivity offering Increased SaaS value-add through investment in software, RC
Slide 30: Thanks!