Sinch Ab · OMXSTO:SINCH
Sinch Ab — Q2 2021 Earnings Presentation
34 slides from Sinch Ab's earnings presentation, Jul 16, 2021
Slide 1: Q2 2021 Investor Presentation
Q2 2021 Investor Presentation 16 July 2021 Oscar Werner CEO Roshan Saldanha CFO Thomas Heath Chief Strategy Officer & Head of Investor Relations
Slide 2: Sinch at a glance
SEK 11.8bn SEK 1.2bn SEK 107bn 2,292 47 countries with revenue in the Adj. EBITDA in the Market Cap people local presence past 12 months past 12 months 170 billion Publicly listed on Customer engagement through mobile technology engagements per year NASDAQ in Stockholm Scalable cloud communications
Slide 3: Track record of profitable growth
Track record of profitable growth 7,000 MessageMedia 6,000 • Focus on Gross profit since pass- 5,000 Inteliquent through revenues vary between geographies SEK million 4,000 Wavy SDI • Acquisitions adding significantly 3,000 MessageMedia to our scale and profitability ACL Inteliquent 2,000 Investing
Slide 4: Establishing a global leader in CPaaS
Establishing a global leader in CPaaS 2019 2021 Source: IDC MarketScape: Worldwide Communications Platform-as-a-Service (“CPaaS”) 2021 Vendor Assessment (doc #US46746221, May 2021). An excerpt is available on sinch.com 4
Slide 5: Creating value for businesses & their customers
Creating value for businesses & their customers Conversational Email SMS Messaging Rich content Limited content Rich content Limited reach 100% reach 100% reach* 35x higher open rate App-like experience * Blending multiple channels including RCS, WhatsApp, Messenger and SMS with landing page technol
Slide 6: Conversational messaging through Instagram
Conversational messaging through Instagram • Enabling businesses to have 1:1 conversations with customers on one of the world’s most loved channels • Over 1 billion monthly active users on Instagram worldwide • 60% of people say they discover new brands on Instagram • 80% of users follow a company A
Slide 7: Zero-click user authentication
Zero-click user authentication • Innovative new way to verify a customer’s mobile phone number No pin code • Verifying that you are in control of needed – your phone & phone number is a direct integration way to implement Two Factor with mobile Authentication (2FA) operators • Data verification has
Slide 8: 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 9: Strategic acquisitions
Strategic acquisitions SAP Digital Interconnect Rich messaging, Low code tools Conversational AI Technology & Go To Market Voice, video, Personalized Conversational Voice SME verification video messaging Australia, Americas, Southeast Asia Europe, APAC Scale and profitability USA, Western Germany, L
Slide 10: Complementary Go-To-Market models
Complementary Go-To-Market models Enterprise Developer SME • Online lead-generation • Online self-signup • Online self-signup • Lead with APIs and SaaS • Lead with APIs • Lead with SaaS & integrations • Target enterprise customers and • Target developers, who may • Target small and medium sized indi
Slide 11: SaaS products focused on ease-of-use
SaaS products focused on ease-of-use • Web-based SaaS application suite supporting outbound messaging and conversational use cases • Optimized for ease-of-use and quick time-to-value • Subscriptions-based price model • Single platform supporting multiple brands • Preconfigured integrations to multip
Slide 12: Global, digital, go-to-market model
Global, digital, go-to-market model Website Hundreds of thousands per users month Leads & Thousands per >5,000 customers 4% of gross profit >25,000 customers Trials month 27% of gross profit 40%+ y/y growth Paying >20% customers >28,000 customers 62% of gross profit Returning 2/3 >1,000 customers cu
Slide 13: Deal rationale
Deal rationale • Leading provider of software-as-as-service for mobile customer engagement to small and medium sized businesses with strong organic growth in the United States, Australia, New Zealand and beyond Message • More than 60,000 customers, sending over 5 billion mobile messages per year Med
Slide 14: April – June 2021
April – June 2021 • Gross profit rising 89% to SEK 869 million (460.3) • Adjusted EBITDA rising 42% to SEK 284 million (200) • Adjusted EBIT excl. acquisition-related amortization of SEK 254 million (185) • Profit after tax of SEK 47 million (37) • Organic Gross Profit growth of 32% in local currenc
Slide 15: Broad-based organic growth
Broad-based organic growth Continued high organic Growth comes both from net new Gross profit growth business & wins from competition* 40% 37% 36% Both 35% 33% 32% 10% 30% 25% 26% 24% 24% 24% 25% 23% 20% Displacement 45% 15% 10% 5% New use case 45% 0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2019 2020 2021 * U
Slide 16: Gross profit growth
Gross profit growth Organic Acquisitions FX SEKm +32% +64% -7% 1 000 294 -34 869 900 800 • Broad organic growth across the 700 business due to investments in 17 -5 600 127 10 product and go to market 460 500 • 32% organic Gross profit growth 400 300 • 89% total Gross profit growth 200 100 0 Messagin
Slide 17: Adjusted EBITDA margin
Adjusted EBITDA margin 14% 12.3% -0.6% 12% -0.3% -0.3% -1.8% • Acquired businesses still operating at lower margin 10% -1.6% 8% 7.7% • Currency headwind and dilutive, temporary traffic 6% • Investments in scale and growth 4% • 42% growth in Adjusted EBITDA 2% despite scale-up investments 0% Q1 21 Di
Slide 18: Headcount increase
Headcount increase 2,500 Wavy 2 229 2,000 1 887 SDI 1 490 1,500 ACL • Headcount rises with recruitment 1,000 992 and acquisitions 744 794 542 573 654 • Added 132 colleagues in Q2 500 441 462 469 496 366 392 412 412 420 • Total headcount at 2,292 at 0 end of Q2 2021 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q
Slide 19: Strong growth in Messaging
Strong growth in Messaging Messaging (SEKm) 4 000 800 • Total Gross profit growth of 76% 3 500 700 with organic growth at 31% 3 000 600 2 500 500 • SDI contributing from 1 November 2 000 400 2020 & Wavy from 1 February 2021 1 500 300 1 000 200 • Investments in product, sales and 500 100 marketing de
Slide 20: Rising message volumes
Rising message volumes Number of transactions per month (billions) 16 14 Wavy • Large increase in September 2020 SDI due to ACL acquisition in India 12 10 • 352% year-on-year growth in ACL transactions in Q2 with 59% growth 8 in comparable units 6 4 • Growth from existing customers, new customers, n
Slide 21: Gross profit per transaction
Gross profit per transaction OPEX/transaction & Gross profit/transaction (SEK) • Gross profit is the primary 0.050 Acquisition of ACL bottom line driver 0.040 • Per-transaction measures relevant to track profitability and economies 0.030 of scale 0.020 • ACL Mobile has significantly lower GP and OPE
Slide 22: Messaging margin affected by M&A
Messaging margin affected by M&A Messaging EBITDA/Gross profit 70% • Revenue and gross margin depend on mix of terminating markets 60% 50% • EBITDA/Gross profit shows margin excluding mobile operator charges 40% 30% • Acquisitions of ACL, SDI, Wavy causing 4.7% dilution to Adj 20% EBITDA/Gross profi
Slide 23: Continued Covid impact on Voice and Video
Continued Covid impact on Voice and Video Voice and Video (SEKm) 115 • Growth compared to previous 105 95 quarters fuelled by Number 85 verification 75 65 55 • Temporary traffic with low gross 45 margin will not continue after Q2 35 25 15 • Work to prepare for upcoming 5 integration with Inteliquent
Slide 24: Broadened product offering to Operators
Broadened product offering to Operators Operators (SEKm) • Sinch and SDI operator 270 organizations united in early 2021 250 230 210 • Strong Q2 performance, both 190 170 organic and SDI 150 130 110 • High margins in Operator Software 90 business, though volatile between 70 50 quarters 30 10 -10 • S
Slide 25: Integration
Integration + SAP Digital Interconnect Integration planning Integration planning Integration Integration Integration • Deal signed in Feb 2021 • Deal signed in June 2021 • TWW closed Oct 2019 • Deal closed Sept 2020 • Deal closed Nov 2020 • Wavy closed Feb 2020 • Regulatory approval • Regulatory app
Slide 26: Q2 2021 Financials
CA Q2 2021 Financials
Slide 27: Income statement
Income statement Q2 Q2 Sinch Group, SEK million 2020 R12M 2021 2020 Net sales 3,682 1,622 8,023 11,809 • Non-recurring items in EBITDA Cost of goods sold and services -2,813 -1,162 -5,840 -8,844 reflect recent M&A activity Gross profit 869 460 2,183 2,966 • SEK 75 million integration cost Other oper
Slide 28: Reconciling Cash flow with EBITDA
Reconciling Cash flow with EBITDA Q2 Q2 SEK million 2021 2020 2020 R12M Adjusted EBITDA 284 200 989 1,165 Paid interest -12 -10 -30 -33 Paid taxes -40 -6 -101 -192 • High conversion of Adjusted Other items not affecting cash 187 -57 -256 4 EBITDA to cash flow Cash flow before changes in • “Other” ca
Slide 29: Cash flow
Cash flow Q2 Q2 Sinch Group, SEK million 2020 R12M 2021 2020 Cash flow before changes in working capital 418 127 602 944 Change in working capital -461 137 -148 -344 Cash flow from operating activities -43 264 454 600 Net investments in tangible and intangible 58 -24 -86 -26 assets Change in financi
Slide 30: Financial targets
Financial targets Targets: • Adjusted EBITDA per share to grow 20% per year Adjusted EBITDA per share, rolling 12 months • Net debt < 3.5x adjusted EBITDA 2.0 over time 1.8 1.6 1.4 Performance: 1.2 • Adjusted EBITDA per share grew 1.0 38% in Q2 21, measured on a rolling 0.8 12 month basis 0.6 0.4 •
Slide 31: Financial leverage
Financial leverage Pro forma net debt/Adjusted EBITDA • Pro forma calculation includes last 2.8 12 months of Adj EBITDA for acquired entities • Updated financial target is to maintain Net debt < 3.5x adjusted EBITDA over time -0.5 • Pro forma Net debt/Adj EBITDA of 2.8x to after recent share issue a
Slide 32: Inteliquent & MessageMedia to benefit margins
Inteliquent & MessageMedia to benefit margins 63% • Inteliquent and MessageMedia 47% operate at higher margins 34% • Inteliquent and MessageMedia 25% transactions will add approx. 22% 8 percentage points to Sinch’s gross 10% margin and 4 percentage points to Sinch’s Adjusted EBITDA margin Gross marg
Slide 33: Key priorities ahead
Key priorities ahead Continued high growth: broad-based organic & through M&A Improving growth in acquired businesses Cost control, synergies and operational efficiency Continued strengthening of our connectivity offering Investment in SaaS products for advanced, Conversational messaging 33
Slide 34: Thanks!
Thanks! Copyright© 2019 CLX Communications AB (publ). All rights reserved. NDA Confidential. 34