Good morning. Welcome to Link Mobility's First Quarter 20 21 Results Presentation. I'm Tom Rogin, I'm Head of Investor Relations. I'm joined by Guillaume van Gaever, CEO and Thomas Berger, CFO, who will present the results. 30.
Please post questions throughout the presentation for a Q and A session at the end. Guillaume?
Thank you, Tom. Dear analysts, dear Investors, thank you very much for being with us this morning for this Q1 2021 interim report. Both, Thomas Berger, Our CFO and myself will be very happy to present to you the Q1 results, and we think this is going to take us 20 to 25 minutes, And then we will open up for questions. So let's get going. First of all, we are happy to announce on this first But in point, the fact that we have increased our EBITDA on a year on year basis for the Q1 by 29%, reaching NOK 109 €1,000,000 NOK.
Also, we are very happy to reach a new level of gross margin profitability, reaching 26.1%, which is 1.3% up. We are also seeing a very good traction in our M and A pipeline. As we IPO'd the company, we told you that we had very attractive M and A discussions and we have now signed our 4th M and A agreement with recently Marketing Platform and AMM in Italy. These two last agreements. We are looking to close the deals and the transactions in the Q2 of 2021.
Altogether, The run rate will be additional revenues of €40,000,000 on an annual basis. For the Q1 2021, our revenue grew by 12%, 22. And on an organic basis by 6%. As planned, the volumes were actually impacted by restrictions And strong restrictions, especially in the Nordics, but throughout Europe, which have impacted our total revenues from transactions. Nevertheless, we have achieved 19% growth in the total number of customers with very low churn rates below 2%.
Actually, we are starting to see a really different shape of our messaging volumes starting from April as society are reopening. And we can report and confirm that we are seeing now in April 31% growth of our total volumes, which is a good sign Coincending with the reopening of society, which will actually continue during the quarter and during the full year. Last but not least, Link Mobility, as we speak, is very well positioned to benefit for this new appetite for brands to reengage with their customer base, and our product Suite is actually very well positioned to do that. But let's explore this in slightly more detail. When we have Presented the IPO, Link Mobility, we told you that there were 2 main categories for messaging volumes.
The first were around notifications, And this is a big proportion of our revenue, but also marketing use cases are equally important. During the pandemic and the different COVID waves, All of the notification business actually has remained very good with commerce and also logistics, for instance, Growing significantly, offsetting lower volumes from airlines or events business. But there are categories that were Strongly impacted negatively by different lockdowns and these are marketing use cases. Link Mobility over the last 20 years As a range of extraordinary products to actually help a lot of brands engaging with their customers. And those products are going to be and are now in high demand As we have seen already in the first signs of April, let's have a look for even the most advanced Use cases.
You know that we can promote simple messages one way, informing about new products, new launches, reopening our stores. 30. Link conversation and Link Flow enables more advanced communication, more advanced conversations with customers. And we are actually preparing now up to 20 campaigns across Europe using the most advanced tools that we have. They can be self serve, which is the example in this case, very easy drag and drop.
All our CSMs can help Customers actually to design the campaigns. And why are we very excited about this potential? It's because now we can use RCS as the mobile native channel to actually do great campaigns with high level of engagement. RCS has been long in coming and now demonstrates the full value with high returns and ROI for the brands. 2.2.
Product sales, call to actions are actually very efficient using RCS. So we are super excited to actually launch in May Those 20 campaigns in countries like France and Germany. Clearly, the message from our results for the Q1 Is that we can see that there are high demand for the use cases around marketing starting when society will reopen and the heavy vaccinations that Europe will 23 Undertake. But our growth is also coming from M and A, as we explained. We are very happy to confirm the Signing of an agreement with marketing platform that we expect to close in the Q2 and marketing platform, which has been created 9 years ago, brings 22.
Advanced customer data platform, which enables us to actually gather information from the customer base and really target 2.3. Great marketing campaign from an omnichannel perspective. Whether email, SMS, app notification, web or social media, marketing platform is an expert 2 in executing those marketing campaigns. This is also a very good sign that the deals was achieved at €13,000,000 with 70% of the transaction paid in shares. With the acquisition of marketing platform, we can enhance our CPaaS offering And of course, deliver proptel and upsell opportunities across all of our footprints with our 40,000 customers.
The 4th acquisition that we did since the IPO is in Italy. This is what we call an add on to our Existing footprint in Italy. With this acquisition of AMM, we are contemplating actually being close to number 2 in the Italian market, which will enable us to create the usual synergies through the better offering and the go to market activities. And we have now confirmed the acquisition of 81 percent of the shares for 18,700,000 and as explained, we will launch the mandatory offer for the remaining shares in the Milan Stock Exchange. With this acquisition, clearly, Link Mobility takes very important steps in Italy to be a leader in the Italian market.
All of these acquisitions have been done in Europe. And as I said during the IPO with Thomas, we are also very well positioned in our M and A pipeline. And stay tuned, we will come back to you regarding more different M and A projects. We are growing not only from M and A, but from growing our customer base. And this list that we present on a quarterly basis really achieves the fact that You can see in the list of our new customers and new partners many different locations, also very different use cases, Whether in logistics with DHL, with Ambiala or Ultimile, we are able to use our messaging services to actually Grow the quality of the customer experience.
We have some very attractive new brands like Lotto24, Coca Cola and Dolce Cabana using different channels such 22nd Fibre and the traditional messaging. We also have partnership agreements that I will explain later with the Aldeyemo And Orange, with whom we've partnered to actually propose to companies like Interim, our services for the expansion of CPaaS offering. So really, some really strong and attractive win. Probably the win that we would like to expand a little bit on is A direct enterprise deal that was signed with Everbridge, which is a critical event management software, which is very well known, which basically helps company to deal with critical situations with the requirements of high degree of reliability and scalability when Events or critical events take place. They've trusted Link Mobility to be able to provide in 26 countries very advanced messaging, Being able to actually help those companies to deal with those critical events.
We're very happy to have proven yet again the reliability and the security of our platforms And we are now convinced that Everbridge will be one of our top 20 customers. Also, when you look at our strategy, we've explained that we are Investing a lot in our partner network. And let me share this exciting news about signing an agreement with Aldeyemo To be able to actually provide our WhatsApp API to Al Diemu customers all across 10 Latin American countries, ranging from banking and finance to retail and logistics. This shows against that through partnership, through enterprise, But also with sales sign up, Link Mobility is growing its customer base with its very, very focused enterprise strategy for long term growth. With this, I can easily confirm as expecting that 2021 is a year which will have 2 different pictures.
The beginning of the year, which has been and is really impacted by heavy lockdowns across all of the countries in Europe And also the release of the economy, the heavy vaccination translating in much higher demand for our products and services, which will be a feature starting from April actually into the rest of the year. On the forward looking statement, we can Just completely reaffirm our ambition to reach by 2024 a revenue of NOK 10,000,000,000 and also achieving higher margins, Proving our scalability with EBITDA up to 13% to 15%, which will, of course, be influenced by different M and A activities that will take place surely 22 from today until the end of 2024. As said, we are also seeing that our go to market investments will translate into a gradual increase in our Organic growth rate up to 20%, and this will be topped up by M and A activities. Again, as said, we have a very healthy and good pipeline that we can execute on for the years going forward. But before we talk about the past, let's go back to some of the key highlights with Thomas Arsenfel.
Over to you, Thomas.
Thank you, again. Let's start the financial section with a look at the revenue development. The next slide shows that we are reporting a revenue of NOK946 million, A 12% growth including M and A and a 6% organic growth excluding M and A. The appreciation of the NOK Towards euro and other currencies reduced the growth rates with 2 percentage points, bringing the organic growth rate up to 8% on a stable FX 2 basis. In the Q1, governments imposed even harsher lockdowns in most European countries as mutated viruses and the 3rd wave of the pandemic hit Europe.
Hard lockdowns were observed in the Nordics for the first time and most governments In Western Europe imposed even more restrictive lockdowns than previous quarters. This had a major negative effect on the whole economy and 22. As much of the activity level was hindered in many sectors by the lockdowns. The public sector, financial industry, logistics and e commerce Had large growth in the Q1 but could not compensate the shortfall on volumes in other sectors. Still, Link reports a 10% growth on messaging volume in the current quarter.
Year to date growth on messaging volumes, Including April is approximately 15%. The temporary reduction in messaging volumes in the Q1 has rebounded already in April as 2.3. On the graph at the bottom of this slide. Messaging volumes in April grew year over year with 31% Prices are adapting quickly to signs of society's reopening. As Gil mentioned, the company is expecting a large growth in messaging volume When societies revert to normal as enterprises have accumulated a need to reengage with end users to restart normal business activity.
Acquisition of Tisme and Webesmis added in total NOK 56,000,000 in revenue for the Q1. The acquisition 22. Marketing platform and AMM in Italy have not been closed and are therefore not included in the reported numbers. Over to the next slide. Next slide, splitting aggregator and enterprise growth.
Aggregator revenue had a negative effect on total revenue growth. The medium to long term revenue growth target of 20% is going to come from the enterprise segment, not the aggregator segment. Low margin aggregator revenue is accepted as the additional volume helps to extract discounts from the mobile operators. In Q1 2020, the revenue from the aggregator segment was Ordinarily high with a growth of 94%. This was impacted also by the initial lockdowns last year.
In the current quarter, a decline of minus 4% is reported. Higher volumes were not needed to fulfill volume discounts towards the mobile operators. Enterprise growth in the Q1 is reported at 6% despite severe lockdown restraints. In the graph at the bottom of the slide, the 3 regions portion of total enterprise revenue growth are displayed. A clear trend can be observed over the previous quarters which have been disturbed in the current quarter by more extensive lockdowns.
The Nordic has contributed historically to around 7 points percentage points of total enterprise revenue growth. In the current quarter, the authorities introduced severe restriction such as lockdowns on retail stores for the first time, resulting in a 4 percentage points decline on the region's contribution to total revenue growth. Same trend is visible in Western Europe. Growth rates for the current quarter reduces the region's contribution to total revenue growth with 3 percentage points compared to historical trends. Central Europe has been more stable as customer mix contains less client from the retail sector and more skewed towards logistics and the finance sector.
The trend in the current quarter is temporary. The company already observes a large pickup in growth levels in April over all regions as shown on the next slide. The company has chosen to report April volumes in connection with the Q1 numbers to highlight the rapid shift In trends caused by government restrictions, April numbers demonstrate a built up demand for Link's products and services which have been released 22. Looking at growth rates per region, Northern Europe has historically experienced high and increasing growth rates driven by a strong intake of new clients together with a good momentum on upselling activities of more advanced products. Q1 2021 stands out as an extraordinary quarter with lower activity levels.
Messaging volumes for April is showing a large uplift in all regions. The Nordics is reporting a messaging volume growth of 24%, Central Europe at 34% and the volume growth in Western Europe of 44%. To set the right expectations for the upcoming Q2, the company expects a lower growth 2.8. Rate on revenue compared to messaging volumes due to FX movements last year. In the Q2 of 2020, the NOK Depreciated compared to euros and other currencies trading at a lower NOK 11 per euro for most of the quarter.
The next slide you are seeing some key KPIs. Year over year, Link's customer stock has organically increased with almost 1300 customer accounts. Link has now 40,000 customer accounts. Net retention rates for the enterprise segment Experienced a temporary slowdown in the current quarter being reported at 104 due to the harder government restrictions And aggregator revenue is diluting total net retention rate to 100. On profitability, the company is happy to report margin expansions for the Q1 both on gross profit and adjusted EBITDA.
Gross profit is reported at 26.1 percent which is 1.3 percentage points up compared to corresponding period last year. Adjusted EBITDA at SEK109 million and the margin of 11.5 percent, which is 1.5 percentage points higher compared to same period last year. Link is operating a scalable business model where large amounts of volumes and revenues from both new and existing clients Can be onboarded with only modest OpEx increases. The acquisitions of WebSMAS And Tisme are going according to plan commercially and contributing to the uplift in gross profit and EBITDA. Next slide summarize the Q1 figures in a P and L overview.
As I said, the revenue reported at SEK 9 and SEK46,000,000 an increase of 12%. Gross margin and adjusted EBITDA increasing with 18% 29% respectively. Adjusted EBITDA for the Q1 ended at NOK 109,000,000. Nonrecurring costs Are impacted by Link's share option program and M and A activities. Cost of depreciation reported at SEK 68,000,000 which is mostly related to the depreciation of assets from acquired companies in accordance with purchase price allocations.
Interest cost of SEK 21,000,000 lower than previous years due to both lower interest bearing debt and interest rates on the current bond 2 funding. The balance sheet after the IPO, we have a solid balance sheet. Total balance sheet is at NOK7.4 billion with an equity ratio of 57%. Working capital is negative, meaning that Link's client and vendors are financing the organic growth. Timing deviation due to Easter has lower working capital in the Q1, but the timing deviation is expected to roll back going forward.
Net interest bearing debt at NOK1.3 billion and significant cash deposits of over NOK800 1,000,000. The balance sheet and the liquidity positions the company for further growth and confirms them in a capacity going forward. That is my part today. Thanks for listening in and I'm handing the word over to Tom to take us through Q and A.
Welcome to the Q and A session. Firstly, we have some questions from Peter Konsley from Sberbank 1 Markets. The gross margin, excluding acquired M and A, seems down. What drove that?
Yes. So, thank you very much for everyone to have listened to the webcast and being with us for the Q and A session. Both Thomas and I will be answering Tom's and the questions that we have. Thank you so much. There are a lot of good questions.
So let's start with Thomas answering the first question from Peter, please.
Yes. Thanks for the question, Petit. The main Impact organically on the gross margin percentage is the region mix. We see that the Nordic has had the harder Q1 Then for example, Central Europe and due to the fact that we have a larger portion of revenue deriving from more profitable advanced Products in the Nordics, that has diluted the total margin somewhat. We don't see any So underlying negative gross margin one trend, there is very little price decreases on clients.
So it's mainly the region mix.
Then Petri has a follow-up question regarding the M and A pipeline and the size of targets, if you can add some color on that.
Yeah. I mean, from an M and A perspective, we have Three types of acquisitions as we explained. We have the add ons, which is the case of Italy and Austria. We have the solution acquisition, which were the case of TISMIN and also the acquisition of marketing platform. And there are also level up cases, which by definition are larger and bigger.
As you understand, Link Mobility is seeking to expand beyond Europe 22. And therefore, bear with us, we do not disclose the key discussions we have, but we know that 2021 will be an important year from an M and A
2. Dan, the company has announced EUR 40,000,000 of acquired revenue since the IPO. What would be the EBITDA effect of that on an annualized basis?
I suggest, Thomas, you Provide some an answer to this question?
Yes, I can. WebEsmans, which we acquired in the Q4 of 2020, we have stated that So the yearly run rate EBITDA on that is around NOK55 1,000,000. TISMY acquired in February 2021, The run rate yearly EBITDA effect is around SEK 30,000,000 SEK 35,000,000 on TISSMI. And then AMM in Italy, We have stated that we do expect an EBITDA contribution of around NOK 23,000,000,000, NOK 24 Millenok, assuming a euro currency at 10 for 2021. Marketing platform, It's the EBITDA contribution, it's much smaller.
We do expect most of the value there to Come from up selling activities going forward. So we have not been specific there on sort of EBITDA contribution, but 23. 2,000,000 to 3,000,000, it's probably a good expectation as a run rate figure.
Then Petter has just a clarification question. What which entities were included in pro form a figures for 2020 reported today? And which entities we have bought have not 13 being included in the pro form
a figures. Of course, Thomas?
Yes, we have included all signed agreements. So that means for 2020, we have made pro form a figures also for WebSMES and TISMY, which have been signed, But not included in the reported figures for the full year. In the Q1, we have added Tismi for January and then marketing platform and AMM for the full period basically.
Then I have a question from Erik Rofdal, which is regarding the growth rate we saw in April of 31%. How can you What's the read for that into May as we are already into May?
Yes. Thank you, Erik, for the question. And I think you've also asked about where the 31% came from, from original basis, which is explained on Slide 15. And this Slide 15 is useful because you can see that, For instance, in April, volumes were up 44% in Western Europe. That also coincides with very, very strict lockdowns Of entire societies in countries like Spain, Italy, France, whereas the increase in April in The Nordics were closer to 24%, while lockdowns were not as strict.
So to answer your question, we don't disclose main number, But it will be a very important influence on the scale of the reopening of society. So we know that comparing month on month, week on week and quarter on quarter volume is quite a difficult exercise because you need to take into account the level of restrictions that were put in place impacting 30% to 40% of our total volumes linked to marketing activities.
And Eric Raffdal has a follow-up question regarding the EBITDA margins and that they were up. And what was the primary M and A that drove that? And as a second question in regards to the new customer wins and how they will contribute to growth in Coming Quarters.
Yes. So you will see on Slide 17, the details of the EBITDA growth coming from organic and also from acquired entities. We're very happy about the The contribution for acquired entities and the momentum it brings to Link Mobility. Going back to The contribution from new customer wins, obviously, we have 40,000 customers and we are growing from, Number 1, the usage growth and the use cases growth from our existing customer base, and we also have the benefits of the growth from new customers. But as explained during the IPO process, this always starts with a simple use case with new customers and then it expands to much higher growth rates from customers we win.
So it's important to remember That we are on track in terms of customer base growth and growth from existing customers, and we therefore can easily Reconfirm our guidance, we gave you for 2024 and also our organic growth rate scale Growth Up TO 20% in the mid- to long term.
This brings us into a follow-up question from Peter Konsley regarding our EBITDA margin target for that period of 13% to 15%. How would that be influenced excluding M and A? And what would be the split between improved gross margins and scalability?
Obviously, we have a very scalable business. But Thomas, do you want to take the question from Peter?
Yes, I can. We have been A little bit conservative when we have ranged the forward looking statement on EBITDA between 13% 15%, it of course Includes M and A and because the margin of the acquired entities are more uncertain, we have been, as I said somewhat conservative. If you look at the footprint that we are having now, if we were to grow that 20 percent in this time period. The scalable business model would result in an EBITDA being higher than 15%. So we are taking into consideration that some of the acquired entities are going to be more pure A2P players with Lower Profitability or in countries where the less portion of revenue are coming from the more advanced solutions and thereby also
30. Then we have an M and A question from Mats Rosendahl and it's more to M and 13. That Link has been very active early in the year and how is the balance sheet and basically the capacity for future M and A?
Yes, maybe I can take that one, Leo. First, we have over SEK 800,000,000 in Bank deposits, cash deposits. So we are well positioned to execute on M and A strategy. As Guillaume said, we have a large pipeline consisting of both bolt on acquisitions, meaning smaller acquisition in countries that we're already operating in and also level up cases, which Bigger Acquisitions. So the balance sheet as we are having it today gives the foundation for Executing on our M and A strategy.
So we are fairly happy with the balance sheet After the IPO and also the terms and conditions on the bond that we could further do tap issues on, We have borrowed EUR 200,000,000 on the existing bond agreement and the total frame there is EUR 350,000,000.
30. There are a few questions from Ramin Khouri at SEB. And the first one is regarding margins 2 for CPaaS products compared to ATP SMS type of products.
Yes, we can confirm that with the CPaaS Solutions, the gross margin percentage and the absolute gross margin is higher. As explained in the video, for instance, for RCS, you can see that This provides a higher return on investment for our customers for the brands that are using RCS as an example and they are also consuming more solutions And software from Link Mobility to execute those campaigns. They also require from time to time the help of a customer success manager, CSM, that is invoiced as professional services. So all in all, the move into CPaaS increases gross margins.
And then, Ramiel Corian has a P and L question regarding the share options cost recorded in the P and L in the Q1 of this year.
Good question from Ramiel. Thomas, do you want to take the question regarding the recurrence of and the nature of The cost that has been booked in Q1?
Yes, I can. Most of the cost in connection to the share option program, it's not going to Yes, cash cost. It's under the Social Security part of it, which has a cash element. The rest is an accounting Principal based on a principle called Black and Scholes. So if you go in and look at the SEK41 1,000,000 that we Having the P and L, only SEK 3,000,000 is a cash element.
The rest is basically how you sort of do the bookkeeping On the timing perspective, with the discrepancy between the share price and the strike price in the share option program. So most of it is non cash, only SEK 3,000,000 is a cash element.
And then we have a question from Julian Serafini at Jefferies. And it's more adding to the evolving growth you've seen in the first in April of this year and what gives the confidence for the growth into the second half of this year, so expanding a bit beyond the Q2 of this year.
Julien, obviously, again, the marketing use cases have been less significant in terms of volumes of messaging 30. During the Q1 as compared to the Q1 of last year where there were no lockdowns whatsoever in January, February, But we all know that society is being reopened progressively across Europe that vaccination programs are 22. Bearing fruit in terms of relaxing society and therefore, a lot of brands have not communicated to their customers for a while. So they are now reengaging aggressively to prepare marketing campaigns to make sure that their Customers can go back to stores and basically enjoy their products and services and therefore, we see that is translating into High demand for campaigns that our customer success managers are now preparing. If you look at, for instance, Northern Europe, that is the case With the prospect of reopening of society in countries like Norway in the next coming weeks, So such is the case for Western Europe.
We see the benefits already in Italy where society has reopened. So really, every Week that goes by, there is more opening and more traffic coming from marketing use cases. And there was a good question from Julian also Referring to comparison with 2019 and we can see double digit growth versus 2019 Clearly, despite the fact that even today, the society in Europe is not fully reopened as it has been the case in 2019, for instance. So That's why we are optimistic and we see that the second half should bring very positive results for Link Mobility.
30. I have a follow-up question on M and A from Iceland. Lutgard at ABG is more on the general success criteria in Link C for acquisitions outside the core European markets.
Obviously, we are clearly looking at companies that are In nature, coming from the A2P background, very strong in mobile messaging and then we can expand With our product offering in CPaaS to drive additional growth rates, we also know that from an international perspective, we can create synergies From reduction in our cost of goods sold, if we have the same criteria and we will maintain the same criteria that the targets Should have very robust enterprise focus, very also strong relationships with local operators, So we can create cost of goods sold synergies and also repeat what we have done historically, which is to be able to cross fertilize Not only the target that has been acquired, but also Link Mobility with additional products and services to our customer base. A lot of the growth comes from this 40,000 customers that we have and we will continue to do so and new acquisitions bring also new opportunities. From 30. M and A perspective, we're very happy about the 4 acquisition that we have done. And again, the pipeline is very strong and we're very positive about
20. I don't believe we have any further questions. So this concludes the Q and A session. For further questions, please don't hesitate to contact 2 Investor Relations. Thank you very much.