Sinch Ab · OMXSTO:SINCH
Sinch Ab — Q4 2020 Earnings Presentation
32 slides from Sinch Ab's earnings presentation, Feb 18, 2021
Slide 1: Q4 2020 Investor Presentation
Q4 2020 Investor Presentation 18 February 2021 Oscar Werner CEO Roshan Saldanha CFO Thomas Heath Chief Strategy Officer & Head of Investor Relations
Slide 2: SEK 8.0bn revenue, SEK 912m Adj. EBITDA, SEK 106bn Market Cap
SEK 8.0bn SEK 912m SEK 106bn 2,083 47 countries with revenue in the Adj. EBITDA in the Market Cap people local presence past 12 months past 12 months 145 billion Publicly listed on Customer engagement through mobile technology engagements per year NASDAQ in Stockholm Scalable cloud communications Se
Slide 3: Track record of profitable growth
Track record of profitable growth 6,000 • Focus on Gross profit since pass- through revenues vary between 5,000 geographies 4,000 Inteliquent • 81% growth in Gross profit and SEK million 3,000 ACL 63% growth in EBITDA in Q4 20 SDI 2,000 Wavy Inteliquent Synergies • Acquisitions of Wavy, SDI, ACL ACL
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: 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 6 6
Slide 7: Rich rendering across channels
Rich rendering across channels SMS RCS WhatsApp Messenger Viber 7
Slide 8: WhatsApp messaging with Salesforce
WhatsApp messaging with Salesforce • Next-generation messaging for Salesforce customers using Marketing Cloud • Joint product development with Salesforce, starting with WhatsApp • Native integration into the Salesforce Marketing Cloud Journey Builder • Available from 16 February Watch more: product
Slide 9: Raising NPS scores with iFood
Raising NPS scores with iFood Challenge • Human agents stretched too thin and struggling to service delivery drivers on time Solution • iFood chatbot to register new drivers, onboard restaurants and Whatsapp measure NPS Slack Results • 70% reductions in delivery Apple Business Chat service costs • 1
Slide 10: 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 11: Strategic acquisitions
Strategic acquisitions Conversational AI Technology & Innovation Go To Market Voice, video, Personalized Rich messaging, Next-generation verification video Low code tools messaging 2016 2017 2018 2020 2021 Scale and profitability USA, Australia, SMS Western Europe South East Asia Brazil Latin Americ
Slide 12: Deal rationale: Inteliquent
Deal rationale: Inteliquent • Largest independent voice communications provider in the United States Inteliquent • 300+ billion voice minutes per year and 100+ million active phone numbers • Around 600 employees including contractors with headquarters in Chicago, Illinois • Establish Sinch as a lead
Slide 13: October – December 2020
October – December 2020 • Gross profit rising 81% to SEK 795.7 million (439.9) • Adjusted EBITDA rising 63% to SEK 325.7 million (199.5) • Adjusted EBIT excl. acquisition-related amortization of SEK 303.7 million (185.7) • Profit after tax of SEK 212.6 million (94.7) • Organic Gross profit growth of
Slide 14: Key growth drivers
Key growth drivers 1. 2. 3. Volume growth & new Businesses increasing Acquisition of SDI, use cases with US big their use of SMS in TWW, Wavy and tech companies addition to email 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 & Wavy investment in • Internal automation channel • ACL platform scalability for improved Conversation API • SDI • Supporting growth scalability • New channel
Slide 16: Strong growth in Messaging
Strong growth in Messaging Messaging (SEKm) • Total Gross profit growth of 84% 800 with organic growth at 47% 3,000 700 2,500 600 • SDI contributing from 1 November 2020 & Wavy from 1 February 2021 2,000 500 1,500 400 • US tech companies continue 300 to fuel growth 1,000 200 • Strong performance in
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 14.0 SDI ACL Mobile in India 12.0 • 354% year-on-year growth in 10.0 transactions in Q4 with 44% growth 8.0 ACL in comparable units 6.0 • Wavy to add further volume fr
Slide 18: 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 19: Rising margin in Messaging
Rising margin in Messaging Messaging EBITDA/Gross profit 70% • Revenue and gross margin depend 60% on mix of terminating markets 50% • EBITDA/Gross profit shows margin excluding mobile operator charges 40% 30% • Adding traffic volume increases gross profit more than it increases 20% opex 10% 0% 1 2
Slide 20: Modest improvement Voice and Video
Modest improvement Voice and Video Voice and Video (SEKm) 80 70 60 • Sharp decrease in demand for Number masking from ride hailing 50 customers as Covid-19 reduces 40 travelling 30 20 • Positive underlying trends in 10 Number verification 0 -10 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2017 20
Slide 21: Recovery in Operators
Recovery in Operators Operators (SEKm) 80 70 60 • High margins in Operator Software 50 business 40 • SDI person-to-person (P2P) 30 messaging hub operating at lower 20 gross margin 10 0 • Promising demand for new 5G -10 Messaging products sold together with Ericsson Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q
Slide 22: Q4 2020 Financials
ore Q4 2020 Financials
Slide 23: Income statement
Income statement Q4 Q4 Sinch Group, SEK million 2020 2019 2020 2019 Net sales 2 999,5 1 540,7 8 023,3 5 035,6 • Non-recurring items in EBITDA Cost of goods sold and services Gross profit -2 203,8 795,7 -1 100,7 439,9 -5 840,0 2 183,3 -3 641,4 1 394,1 reflect recent M&A activity Other operating incom
Slide 24: Acquisitions: Gross profit growth
Gross profit growth Organic Acquisitions FX SEKm +37% +49% -5% 900 215 -23 796 800 • Gross profit growth of 81% 700 compared to Q4 2019 169 -7 0 0 600 • 37% organic Gross profit growth 440 500 helped by record December 400 300 • Strengthened SEK causing 200 currency headwind 100 0 • Big US tech comp
Slide 25: Headcount increase
Headcount increase 128% 1600 1 490 1400 • Headcount rises with recruitment 1200 and acquisitions 992 1000 744 794 • 1,778 people in Sinch at end of Q4 800 654 600 496 542 573 • 305 people joining from Wavy on 462 469 366 392 412 412 420 441 1 February 2021 400 200 • 159 SDI consultants now recognise
Slide 26: Reconciling Cash flow with EBITDA
Reconciling Cash flow with EBITDA Q4 Q4 SEK million 2020 2019 2020 2019 Adjusted EBITDA 325.7 199.5 912.5 573.5 Paid interest -5.6 -2.4 -29.7 -20.8 Paid taxes -19.2 -54.0 -101.3 -117.4 • Acquisition and integration costs Other -145.9 -6.6 -179.4 -18.2 are visible in cash flow Cash flow before change
Slide 27: Cash flow
Cash flow Q4 Q4 Sinch Group, SEK million 2020 2019 2020 R12M Cash flow before changes in working capital 154.9 149.7 602.1 453.5 Changes in working capital -206.7 -13.7 -148.2 -126.2 Cash flow from operating activities -51.8 135.9 453.9 327.3 Net investments in tangible • Negative change in working
Slide 28: Integration
Integration + SAP Digital Interconnect Integration planning Integration Integration Integration • Deal signed in February 2021 • TWW closed October 2019 • Deal closed September 2020 • Deal closed November 2020 • Wavy closed February 2020 • Regulatory approval process is • Onboarding and consolidatio
Slide 29: 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 16.0 14.0 Performance: 12.0 • Adjusted EBITDA per share grew 10.0 43% in Q4 20, measured on a rolling 8.0 12 month basis 6.0 4.0 • Net
Slide 30: Financial leverage
Financial leverage Pro forma net debt/Adjusted EBITDA 3.4 2.5 • 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 time -1.3 -1.8 -2.2 Q4 20 Q4 20 + Wavy + Inteliquent reported pro forma 30 The acqu
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 Integration of Wavy & TWW, ACL and SDI Continued strengthening of our connectivity offering Investment in
Slide 32: Thanks!
Thanks! Copyright© 2019 CLX Communications AB (publ). All rights reserved. NDA Confidential. 32