Sinch Ab · OMXSTO:SINCH
Sinch Ab — Q3 2020 Earnings Presentation
32 slides from Sinch Ab's earnings presentation, Nov 3, 2020
Slide 1: Q3 2020 Investor Presentation
Q3 2020 Investor Presentation 3 November 2020 Oscar Werner CEO Roshan Saldanha CFO Thomas Heath Chief Strategy Officer & Head of Investor Relations
Slide 2: Sinch at a glance
SEK 6.6bn SEK 786m SEK 48bn 1,484 41 countries with revenue in the Adj. EBITDA in the Market Cap people local presence past 12 months past 12 months 107 billion Publicly listed on Customer engagement through mobile technology engagements per year NASDAQ in Stockholm Scalable cloud communications Ser
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 SDI through revenues vary between geographies SEK million 2,000 Wavy • 40% growth in Gross profit and 1,500 Synergies 53% growth in EBITDA in Q3 20 ACL 1,000 SDI • Acquisitions of Wavy, SDI and ACL Mobile add
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: Creating value for businesses & their customers
Creating value for businesses & their customers Next-gen 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 technology 5
Slide 6: Customer case: Driving conversion for Cdiscount
Customer case: Driving conversion for Cdiscount Cdiscount objectives • French e-commerce company Cdiscount looking to improve conversion rates on marketing campaigns • Expanding on previous positive experience of targeted marketing with SMS Sinch value proposition • Mobile campaign using RCS messagi
Slide 7: 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 8: 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 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: 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 11: The Sinch Conversation API
The Sinch Conversation API • Send and receive messages on multiple conversational channels through a single API • Leverage the expanded feature set of next-generation messaging channels • WhatsApp, RCS, Viber, SMS and more • Support for bots with seamless handover to a human when needed 11 11
Slide 12: Rich rendering across channels
Rich rendering across channels SMS RCS WhatsApp Messenger Viber 12
Slide 13: July – September 2020
July – September 2020 • Gross profit rising 40% to SEK 480.6 million (343.6) • Adjusted EBITDA rising 53% to SEK 226.0 million (147.6) • Adjusted EBIT excl. acquisition-related amortization of SEK 210.7 million (131.5) • Profit after tax of SEK 96.4 million (68.7) • Organic Gross profit growth of 24
Slide 14: Key growth drivers
Key growth drivers 1. 2. 3. Volume growth & new Businesses increasing Acquisition of TWW, use cases with US big their use of SMS in myElefant, Chatlayer tech companies addition to email and ACL Mobile Growing both with new and existing customers 14
Slide 15: Four investment areas
Four investment areas Operational New Integration Organic growth efficiency technology • Continuous • COGS efficiency • Unified cross- • TWW, myElefant & investment in • Internal automation channel Chatlayer platform scalability for improved Conversation API • ACL Mobile • Supporting growth scalabil
Slide 16: Strong growth in Messaging
Strong growth in Messaging Messaging (SEKm) • Total Gross profit growth of 57% 2,000 with organic growth at 35% 1,800 1,600 • US tech companies continue 1,400 to fuel growth 1,200 1,000 • myElefant & TWW included since 800 mid-October 2019, Chatlayer since April 2020, ACL Mobile since 600 September
Slide 17: Rising message volumes
Rising message volumes Number of transactions per month (billions) • Very large increase in September 2020 due to the acquisition of 8.0 ACL Mobile in India 7.0 • 265% year-on-year growth in 6.0 transactions in Q3 with 19% growth in comparable units 5.0 4.0 • SAP Digital Interconnect will add furthe
Slide 18: Gross profit per transaction
Gross profit per transaction OPEX/transaction & Gross profit/transaction (SEK) Acquisition of • Gross profit is the primary 0.050 ACL Mobile 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
Slide 19: Rising margin in Messaging
Rising margin in Messaging • Revenue and gross margin depend on mix of terminating markets Messaging EBITDA/Gross profit • EBITDA/Gross profit shows margin 60% excluding mobile operator charges 50% • Adding traffic volume increases 40% gross profit more than it increases opex 30% • Continued opex in
Slide 20: Modest improvement Voice and Video
Modest improvement Voice and Video Voice and Video (SEKm) 80 • Sharp decrease in demand for Number masking from ride hailing 70 customers as Covid-19 reduces 60 travelling 50 40 • Improvement towards end of the 30 quarter, but uncertain future due to 20 renewed lockdowns 10 • Positive underlying tre
Slide 21: Recovery in Operators
Recovery in Operators Operators (SEKm) 50 40 • Return to profitability, partly driven by reduced currency headwind 30 • Lengthened sales cycles as with 20 lower operator investments due to Covid-19 10 • Positive customer feedback to new 5G Messaging products sold 0 together with Ericsson -10 Q1 Q2 Q
Slide 22: Q3 2020 Financials
ore Q3 2020 Financials
Slide 23: Income statement
Income statement Q3 Q3 SEK million 2020 2019 2019 R12M • Non-recurring Acquisition cost of Net sales 1,777.7 1,216.4 5,035.6 6,564.5 SEK 68.8 million in Q3 20 related Cost of goods sold and services -1,297.1 -872.9 -3,641.4 -4,737.0 mainly to SAP Digital Interconnect Gross profit 480.6 343.6 1,394.1
Slide 24: Acquisitions: Gross profit growth
Gross profit growth Organic Acquisitions FX SEKm +24% +21% -5% 600 500 72 -16 481 • 40% growth in Gross profit despite 95 -15 2 0 headwinds in Operators and Voice 400 344 and Video 300 • 24% organic Gross profit growth 200 • 21% contribution from acquisitions 100 • Big US tech companies and 0 acquis
Slide 25: Headcount increase
Headcount increase 992 1,000 900 • Headcount rises with recruitment 800 744 794 and acquisitions 654 700 573 • Employee cost is the largest 600 496 542 contributor to group Opex 469 500 420 441 462 392 412 412 400 366 • Headcount at 1,162 at end of Q3, 300 including 288 employees from 200 ACL Mobile
Slide 26: Reconciling Cash flow with EBITDA
Reconciling Cash flow with EBITDA Q3 Q3 SEK million 2020 2019 2019 R12M Adjusted EBITDA 226.0 147.6 573.5 786.3 • Strong underlying cash generation Paid interest -7.7 -5.9 -20.8 -26.4 Paid taxes -72.7 -8.1 -117.4 -136.1 • Higher paid tax in the United States Other -0.7 10.4 18.2 -26.9 due to timing
Slide 27: Cash flow
Cash flow Q3 Q3 SEK million 2020 2019 2019 R12M Cash flow before changes in working capital 145.0 144.0 453.5 596.9 Changes in working capital -37.6 -120.9 -126.2 44.8 Cash flow from operating activities 107.4 23.1 327.3 641.7 Net investments in fixed assets and intangible assets -21.9 -13.7 -56.0 -
Slide 28: 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, slight delay is possibl
Slide 29: Financial targets
Financial targets Targets: • Adjusted EBITDA per share to grow Adjusted EBITDA per share, rolling 12 months 20% per year 16.0 • Net debt < 2.5x adjusted EBITDA over time 14.0 12.0 10.0 Performance: 8.0 • Adjusted EBITDA per share grew 51% in Q3 20, measured on a rolling 6.0 12 month basis 4.0 • Net
Slide 30: Financial leverage
Financial leverage Pro forma net debt/Adjusted EBITDA 2.5 1.8 1.4 • Pro forma calculation includes last 12 months of Adj EBITDA for acquired entities • Financial target is to maintain Net -1.2 -1.2 debt < 2.5x adjusted EBITDA over time Q3 20 + TWW, + SDI + Wavy reported myElefant, Chatlayer, ACL The
Slide 31: Key priorities ahead
Key priorities ahead Continued growth with US-based, global tech companies Initiatives for broadened growth across the base New customer wins in next-gen messaging through Sinch Conversation API Closing of pending transactions Technical and commercial integration of SAP Digital Interconnect Continue
Slide 32: Thanks!
Thanks! Copyright© 2019 CLX Communications AB (publ). All rights reserved. NDA Confidential. 32