Good morning, welcome to the fourth quarter results presentation for Link Mobility. I'm Tom Rogn, Head of Investor Relations. I'm joined by Thomas Berge, Interim CEO, and Morten Edvardsen, Interim CFO, who will present the results. Following the presentation, there will be a Q&A session. To ask questions directly, please refer to dial-in details in the stock exchange release. It is also possible to post questions online during the presentation and Q&A. Thomas.
Thank you, Tom, and welcome everybody to LINK's fourth quarter presentation. LINK is the leading and largest CPaaS player in Europe. Our strategy is dedicated to providing digital communication products to the enterprise market for them to interact with their end customers. We approach the enterprise market through a strategy of local touchpoints with our clients. We have sales reps, customer service support, and customer success employees winning new contracts and operating our clients in local language and culture. This is enabling a larger reach than many of our competitors who are having a more regional or centralized approach to the market. LINK's 50,000 clients, serviced by our 30 offices in 19 countries, are a result of the successful implementation of this strategy over many years. Group revenue during the last 12 months was recorded at NOK 5.2 billion.
LINK has grown significantly over the last years with a CAGR of 22%. Profitability has always been a key priority. LINK is growing the business while generating profitability and net positive operating cash flow. Reported Adjusted EBITDA in 2019 of NOK 308 million has more than doubled to NOK 625 million for 2022, or a CAGR of 27%. The growth comes from both organic growth and growth from M&A. Over to the main highlights for the fourth quarter. All-time high revenue of NOK 1.5 billion or a growth of 18%. Organic revenue growth for the fourth quarter is 12% in fixed currency. All-time high gross profit of NOK 400 million or a growth of 11%. Also all-time high Adjusted EBITDA of NOK 188 million.
OpEx reductions contributed with NOK 9 million in the quarter ahead of target. We are observing strong revenue growth in the U.S. and for global messaging. In the U.S., critical event revenue has normalized compared to the softer quarter same period last year. We also observed strong growth on messaging solution revenue driven by the implementation of the multiple new contracts, one since the summer. The fourth quarter displayed a satisfactory development in Europe, especially within the retail sector. Campaign activity for the retail sector was high and in accordance with a normal year and seasonality compared to the slower previous two quarters. Gross profit growth in fixed currency of 5% lower than revenue growth mainly due to mixed effects.
Increased revenue from the low margin global messaging segment and loss of high margin COVID traffic recorded last year mitigated the positive impact from the high margin contribution in the US. Morten will provide further details in his section. LINK is happy to report a high inflow of new contracts in the current quarter of 644 new agreements. I will elaborate further on the new business and contract backlog in later slides. LINK shifted focus and improved commercial execution in 2022 as a response to several challenges. As communicated previous quarters, LINK has recalibrated commercial efforts to focus more on existing growth opportunities for products with proven market demand.
LINK has rebalanced sales resources towards mature and selected CPaaS products to build stronger growth momentum in the near term toned down resources spent on building market demand for new products without established market adoption. Commercial investments have been aligned with underlying market demand to avoid over-investing OpEx and CapEx too far ahead of market adoption. The execution is supported by detailed sales plans per product and sales rep on a quarterly basis. Progress and KPIs are monitored closely. Sale is a key part of LINK's DNA, this has been heavily emphasized and reinforced in 2022. The challenges experienced in 2022 has negatively impacted the growth rate and profitability. Slower momentum on contract backlog upon entering 2022 increasing cost base connected to activities which did not drive commercial performance satisfactory lowered profitability.
Macroeconomic uncertainty resulted in lower activity and softer volumes from the retail sector in Q2 and Q3. Elevated COVID volumes due to communication in connection with testing and vaccination in 2021 lowered the underlying growth momentum on gross profit in 2022 due to higher comparables. We are seeing the positive results from the shift in focus and execution in the second half of 2022, and especially in Q4. Contract backlog is at an all-time high with a 63% growth for H2 compared to same period last year. We also see a strong growth momentum on new business on selected global clients, both in absolute amounts and %. LINK is increasingly relevant and attractive as a partner for global clients due to additional products and a larger footprint. Global clients are increasing their usage of high quality products and services for dedicated functions or features.
It is here that we see LINK has the best position to win new business. I have already mentioned the OpEx reductions implemented late 2022, which are ahead of and larger than previous forecast. For 2022, revenue ended at almost NOK 5.2 billion or an organic growth of 12%, which was in the high end of the growth guidance given for 2022. Gross profit at almost NOK 1.4 billion or an organic growth of 4% in fixed currency. The growth momentum was negatively impacted with -3 percentage points by high profit non-recurring COVID volumes in 2021. Adjusted EBITDA reported at NOK 625 million. Go to the next slide where we are going through LINK's expectations for 2023.
The key target for 2023 is to increase gross profit growth, both in % and absolute amounts compared to 2022 and significantly lift Adjusted EBITDA. We are concrete on LINK's forward-looking statement for 2023 with a full year organic Adjusted EBITDA growth of 12%-15% in fixed currency. This translates into an EBITDA target for 2023 of between NOK 700 million and NOK 720 million, assuming stable currency from the 2022 starting point of NOK 625 million. For 2023, LINK expects high gross profit growth from the accelerated momentum in new business and increased profitability due to OpEx savings. New business secured in H2 this year is 63% higher than the same period last year, which will increase gross profit growth in 2023 when the new contracts are implemented.
OpEx savings will contribute an increase in the 2023 Adjusted EBITDA of NOK 60 million versus the year before. The underlying gross profit growth rate for 2022 has been reduced by non-recurring COVID traffic in 2021, elevating their comparables. The negative impact will churn out of the comparable numbers after March 2023. The reported gross profit growth will equal the higher underlying growth momentum. I will present more details on these three elements on the next three slides. Churn is estimated to be at a low level, similar with historical trends. LINK still see macroeconomic uncertainty for 2023, but do not expect or foresee any material impact as of now, which differs from the experience over the last nine months.
LINK see significant improvements in new business wins over the near term quarters based on the renewed focus and change in commercial execution. On the graph on the right, the estimated annualized gross profit on new contracts for H1 and H2 over 2021 and 2022 are displayed. The numbers are extracted from our CRM system, the estimations are based on contractual arrangements or specific dialogue with clients. In H2 this year, new contracts are 63% higher than the same period last year or an increase of almost EUR 30 million in expected annualized gross profit. This is not including the U.S., where we recently have won several very large deals which will further improve the future growth potential of the business. Historically, about 75% of the gross profit is recorded in the P&L after 12 months for the new contracts.
The company expects the higher contract backlog to benefit gross profit growth in 2023. LINK has also a healthy sales pipeline in addition to the historical high number of new contracts, and we're working hard to maximize new contract wins for 2023 also. Cost savings are ahead of the forecasted plan for the current quarter and also reforecasted at a significant higher level for 2023. Total cost savings for Q4 are reported at NOK 13 million compared to the original forecast of NOK 9 million. Total cost savings for 2023 are reforecasted at NOK 105 million or an increase of NOK 27 million from previous forecast. Looking only at OpEx, current quarter is reporting NOK 9 million in cost savings and the reforecast for 2023 is NOK 76 million or NOK 28 million higher than the previous forecast.
Cost savings for 2023 are NOK 60 million higher than the previous year as the full year effect is achieved together with some additional initiatives to be implemented next year. Mentioned previously, gross profit growth in 2022 had two main drivers: the underlying growth momentum of 7% and a net negative impact of -3% from non-recurring COVID business in the year-over-year comparison. After March 2023, the reported organic gross profit growth will be equal to the underlying growth momentum as the non-recurring volumes will have churned out of the comparable numbers helping the growth momentum next year. LINK has close to 50,000 customer accounts and has attracted almost 2,000 new customer accounts organically compared to the end of last year. Revenue churn is consistently low, around 1% of revenue.
The 644 contracts won in the current quarter are at the same level as last year, but the average expected contract value is significantly higher. We will see more details here on slide 11. After a soft H1, the U.S. is reporting significant growth and traction in H2. Our U.S. business displayed very high growth rates in the fourth quarter, but also closed several large new agreements. Gross profit was reported at an all-time high of almost $9 million, or a growth of 54%. We see a strong growth momentum for both critical event revenue and messaging solution revenue. Critical event revenue is normally recorded in the third and fourth quarter of the year. For the current quarter, critical event revenue had a normal revenue level, but higher than same period last year due to unusual activity in Q4 2021.
We roll out new contracts outside the geographical areas of legacy clients, we see a large potential in scaling critical event revenue also for other parts of the year. For messaging solutions, the U.S. team have secured several material new contracts, resulting in a high order backlog for 2023. Revenue will be recorded on these contracts in 2023 as the contracts are implemented. Want to mention two material three-year contracts which were secured late December with a committed contract value of $7.6 million. We will start booking revenue as the implementation starts, which will be spread out in 2023. Additional critical event revenues are expected after implementation, this will come on top of the $7.6 million. The two new clients are large utility companies, each with more than 10,000 employees and several million end users.
In November, LINK took over a customer base in the U.S. with a cash payment of NOK 62 million. This was a carve-out from a larger undisclosed entity. We are not able to disclose details due to regulations in the agreement between the parties. The customer base will provide further diversification and growth opportunities for LINK in the U.S. The customer base will not have material impact on LINK's financials, the multiple is 3.5x Adjusted EBITDA, including an allotment for additional OpEx. OpEx has been added to our existing U.S. team to operate the customer base, has been fully merged with Message Broadcast in December. The customer base is strong, with a few solid brands with a higher revenue contribution and a longer tail of smaller clients. There is good traction on securing new agreements in the fourth quarter.
As you can see from the graphs, in the current quarter, LINK has signed new contracts with an expected value of annualized gross profit of NOK 47 million, which is NOK 21 million higher than same quarter last year, or a growth of 82%. These numbers do not include the US, which would generate even further growth on the contract backlog. New contracts for more traditional A2P products grew with NOK 18 million on an estimated annualized gross profit contribution year-over-year or 77% growth. Contracts will be implemented gradually, and historical data indicates 75% of gross profit will be recorded in the P&L after the first 12 months for market-ready products. New contracts for CPaaS products are displaying a 140% growth rate compared to same quarter last year on estimated gross profit contribution.
For these advanced products, we observe longer lead times to scale and generate estimated gross profit. Before handing the word over to Morten, who will take us through the financial review, I will end my part of the presentation with some comments on market trends. The market is developing in accordance with our expectations and in line with historical trends. There is an accelerated growth trend for CPaaS product, albeit from low levels. chatbots, conversational messaging, digital payment solution, and WhatsApp RCS are products with established market demand and constitute the main portion of new contracts within the CPaaS space for LINK, which we just saw is growing rapidly. Notification use cases have a stable market demand, and the growth is estimated in the high single digits, mainly driven by alerts, reminders, and payments, as well as mobile identity and security products.
Volumes deriving from passwords are stable. Clients utilizing messaging within the mobile marketing space increasingly wants access to multi-channel solutions, diverting away from mass communication towards segmentation and ultimately personalized offers and conversational solutions. Mobile marketing volumes are more volatile, especially for the less advanced use cases. As the clients use more advanced solutions, volatility reduces as return on their investment increases and our usage stabilizes. Customer service is a huge growth opportunity for the CPaaS industry. LINK has a very active partnership strategy here and want to connect our software and APIs towards the customer service software vendors to provide better end-user communication and satisfaction by substituting parts of the IVR with messaging solutions. Over to Morten for the financial review.
Thank you, Thomas. I will now go through the fourth quarter financials for the group. LINK reports all-time high quarterly revenue of more than NOK 1.5 billion or an 18% growth with only a limited contribution from M&A in the quarter. Organic growth is reported at 12% in fixed currency, with a strong contribution from the U.S. in the quarter, with a revenue growth of 91% from both an uplift in critical events and messaging solutions. The critical events messaging revenue of NOK 20 million in the quarter was predominantly related to winter storms during the Christmas week. The global messaging segment contributed positively with strong revenue growth of 64% in the quarter. We observed improved retail activity during the fourth quarter, with retailers investing in marketing campaigns during both the Black Week and the festive season to attract consumers back into physical shops.
The total volume growth for the quarter was 11% and lower than the reported revenue growth. The main drivers for this variance is the higher share of non-messaging revenue, like licenses and professional services, especially in the U.S. Global messaging volume mix towards destinations with higher price per message, in line with the trend from the previous quarter. Gross profit is reported at NOK 400 million or a reported growth of 11%, with only a limited impact from acquisitions. Organic gross profit grew 5% in fixed currency. Growth in gross profit year-over-year was driven by a top-line growth in Central Europe, the U.S., and the global messaging segments. The higher gross profit contribution in the US was related to normalized critical event messaging and improved contribution from messaging revenue related to contracts signed during the second half of 2022.
Gross profit contribution in European enterprise regions improved compared to previous quarters from a rebound in retail volumes following normal seasonality. Despite improved retail volumes, the strong COVID traffic last year continued to impact comparable year-on-year growth negatively. The gross profit growth is lower than revenue growth from a margin dilution effect, mainly related to change in revenue composition compared to same quarter last year. In the lower graph, we have bridged out the development in gross margin year-on-year. The reported gross margin declined 1.5 percentage points to 26.2%. In Northern Europe, the average margin contraction was mainly related to COGS increases passed on to clients, resulting in a lower percentage gross margin with no or slightly positive effect on nominal gross profit per message.
In Central Europe, a negative traffic mix effect away from high margin COVID traffic, combined with growth in revenue from large global clients, reduced the average gross margin. In the graph, you also see the margin dilution effect due to a higher share of revenue from the global messaging segment this quarter. The higher share of U.S. revenue partly mitigate the previously mentioned effects. The U.S. margin decline year-on-year relates to a one-time accounting correction last year, but remained fairly stable quarter-over-quarter. Moving on to EBITDA. Adjusted EBITDA is reported at NOK 188 million and a total growth of 7%, mostly reflecting the organic development. The increase in Adjusted EBITDA year-on-year was driven by improved gross profit contribution from the U.S. and from global messaging, partly offset by a softer development in the European enterprise regions.
The implemented cost initiatives contributed NOK 9 million to reduced OpEx for the quarter. In total, the expected improvement in profitability from executed and planned cost initiatives amounts to NOK 60 million for the full year 2023 compared to 2022. In the bottom graph, we have detailed out the non-recurring costs for the fourth quarter of NOK 63 million. NOK 24 million was recognized as restructuring costs, mainly linked to the cost initiatives, with an annualized positive run rate cash effect of NOK 68 million from initiatives implemented as of year-end 2022. M&A cost of NOK 14 million was recognized for external services, whereof NOK 5 million related to the acquisition of the customer base in the U.S., NOK 5 million related to run-off costs for other closed projects, and NOK 4 million related to ongoing projects.
Share option cost was recognized at NOK 10 million or lower than in the last quarter as the second of three tranches of RSUs have invested during the fourth quarter. The cash effect related to vested RSUs is limited to Social Security tax, with only a small cash effect in the quarter. In the fourth quarter, LINK received a claim for telecom tax in France related to 2020 and 2021 following a tax audit. Based on an external evaluation, LINK has decided to recognize the tax liability in the fourth quarter financials. The claims related to 2019 through 2021 have been booked as a non-recurring cost in the quarter.
The full year recognized 2022 OpEx impact reflects the calculated liability for the year at an expected future run rate of around NOK 5 million, which can partly be passed on to clients. The net OpEx impact in the fourth quarter was however only NOK 0.5 million, as a liability of NOK 4 million was already recognized in the second quarter. The historical claims are payable during first and second quarter this year. LINK assumes that the tax will be payable for all players in the French market going forward. Moving on to the P&L overview. In the previous slides, I've already been through the P&L down to the EBITDA. Cost of depreciation and amortization is supported at NOK 109 million, where of NOK 81 million relates to the depreciation of assets deriving from Purchase Price Allocations of acquired companies.
Total cost of depreciation increased quarter-over-quarter, mainly related to currency effects. Recent impairment testing indicated an impairment for Spanish entities within the Western Europe region. A NOK 118 million impairment cost is booked in the fourth quarter against the goodwill recognized in the PPAs related to the acquisition of GMS and Didimo back in 2017. Net financial items are reported at negative NOK 168 million, negatively impacted by a net currency loss of NOK 146 million, mainly reflecting a variance in the USD to NOK currency rate. Interest cost of NOK 34 million, mainly related to outstanding bond loan of EUR 370 million. Other financial items positive by NOK 13 million, mainly from positive adjustment to an outstanding earn-out agreement. Moving on to the next slide on the balance sheet.
Total balance sheet reported at NOK 11 billion with an equity ratio of 48%. Cash reserves reported at NOK 827 million and reported down quarter-over-quarter with NOK 89 million, where of NOK 8 million related to negative currency impact. On October 5th, LINK made an early settlement of the seller's credit related to the Tismi acquisition in 2021. The total amount paid out was NOK 74 million, including principal and accrued interest. During the quarter, LINK acquired and integrated the U.S. customer base carved out from a larger entity. The transaction was settled in cash of NOK 62 million. Adjusted for these two material cash outflows, the cash balance expanded by NOK 47 million quarter-over-quarter. Receivables increased by NOK 339 million, and payables increased by NOK 268 million.
The development is mainly driven by the organic growth and represent normal fluctuations of working capital related to collections and payments. Revenue growth in the U.S. business drives a higher increase in receivables than payables due to the revenue mix and the higher gross margin level, affecting the working capital in the quarter. Net interest-bearing debt is reported at NOK 2.96 billion and related to LINK's one outstanding bond. The bond has a low fixed coupon of 3.375% with no maturities or covenants before December 2025, securing an attractive long-term funding. To the cash flow summary. I will highlight on a few of the cash flow items for the fourth quarter.
The release of working capital is slightly lower than fourth quarter last year, that is mainly driven by the growth in the U.S. business in the quarter and the delay of collection related to large and solid global enterprise clients into the beginning of 2023. In the cash flow overview, the non-recurring costs for the quarter includes the restructuring costs mainly related to the implemented cost initiatives, the non-recurring historical liability for telecom tax in France, and the fully external M&A costs. That result in our reported net cash flow from operating activities, including non-recurring costs of NOK 417 million on an LTM basis, or NOK 170 million in the current quarter. Cash flow from operations, excluding non-recurring costs, was NOK 521 million on an LTM basis for a ratio of 83% compared to reported LTM Adjusted EBITDA.
CapEx for the quarter includes NOK 5 million related to IFRS 15 recognition for commissions on new contracts signed in the U.S. The paid interest includes NOK 4 million related to interest paid on seller's credit for Tismi acquisition, which was fully repaid in the quarter as previously mentioned. The free cash flow after deducting CapEx of NOK 180 million and annual interest cost of NOK 142 million, LINK generated excess cash during the last 12 months of NOK 200 million. The leverage declined slightly in the quarter and the implicit Adjusted EBITDA level from our 2023 guiding will reduce leverage further towards the financial policy of 3.5 times Adjusted EBITDA. That completes the financial section. Now over to Tom and Q&A.
Thank you, Morten. We are then ready for the Q&A. Please dial in to ask questions directly or post questions online. Operator, please can you help us with the Q&A?
Thank you. If you have a question for the speakers, please press five star on your telephone keypad. To withdraw your question, please press five star again. We'll have a brief pause while questions are being registered. There are no questions at this moment, I'll hand the word back to the speakers.
We will continue with questions posted online. First question is related to gross profit growth in 2023. Will that mainly be driven by higher margin use cases or easier comps?
We haven't given any specific forward-looking statement on gross profit growth in 2023, except that we expect it to be higher both in percent and nominal amounts compared to 2022. Qualitative feedback from me is that we expect both to help. We see that we have a good sales momentum on on contracts with a satisfactory gross profit. How this plays out in the P&L in 2023 is also dependent on mix effects, which can skew the numbers.
We have a follow-up questions on margins, specifically to the hyperscaler, which was mentioned in the previous quarter. Do you already see a contribution from higher margin solutions to that customer?
Yeah, we see, a beginning, but we do expect it will increase into 2023. Morten, do you want to give some more flavor here?
Yes, I think, there are basically two effects. There is, business we already guided on, a lower level of, the OTP traffic from the hyperscaler, and then we're gradually, implementing the new contracts with a higher margin, but that doesn't have a very material effect in the fourth quarter, but we are, scaling up.
I have some questions on the retail growth. We mentioned in the Q4 report that it was a bit better in Q4 than it was in Q2 and Q3. Was that mainly driven by campaigns or discount code type of traffic?
The retail volumes were normal and had the seasonality which we have seen previous years. The increase is valid for all use cases and type of messages. We see a higher increase on the more advanced use cases within the retail, mobile marketing for retail, as I also said, when we sort of discussed the slide regarding market trends.
We have a question on critical notifications. There's been some storms in the California early this year. Will that impact Q1? In general, how is the competitive landscape for critical notifications?
I can start with the competitive landscape for the critical notifications. There are a few players active here, Message Broadcast being the dominant one, with according to our opinion at least, a superior product offering and a much better reputation for throughput and high quality. I would define the competitive landscape as limited for critical notifications, and we are the dominant player. Morten, do you want to take the comments on the storms and earthquakes?
Yeah, there have been some activity until now. The earthquake was yesterday. I haven't had an update on the sort of magnitude of the messaging we have done related to this event.
Yes. Yeah, normally Q1 is a low season for critical events, just so everybody has that in mind. Yeah.
A question regarding impairment in Spain, if you can provide any details on that, and also if the company sees any impairment risk for other items.
I can start with some comments on Spain because I was here back in 2017 when we did the acquisitions. There were two acquisitions done in Spain and we have seen a decline in performance in 2018, mainly due to two factors, to be quite honest. A little bit clumsy execution from the LINK side, where we didn't do the right things after closing when we merged the two entities, which impacted our ability to extract growth out of the Spanish market in 2018 and 2019. We're more back on track now. In late 2021, 2022, we're starting to see an uplift.
Secondly, in 2018, the Spanish mobile operators began competing between themselves for traffic belonging to other mobile operators. They drove down the A2P price and created basically price pressure in 2018 because they offered very low prices to take on especially aggregator volumes directly. Do you want to comment, Morten, on the Purchase Price Allocations and the headroom that we are seeing?
Yeah, I think you discussed sort of Spain and those sort of effects are of course taken into the assumptions when we do the impairment testing. That's what drove also the impairment. When it comes to the headroom in general, we are very comfortable on the level right now.
Yes. Yes. Just a last comment on it. Just to be clear on that, the reason why we did the writedown now, it's not because the assumptions behind the forward-looking performance for Spain is lower this year than last year. It's more to do with the technical side, with increasing WACC. Spain was the country then the last year that we had the lowest headroom on. Basically, the increased WACC ate up the headroom.
Yeah.
We decided to take a write that now.
Yeah. There are some questions regarding the leverage level, how that impacts with FX. This is a EUR bond, so that could have an impact when you translate it to NOK, and also the plans to refinance that outstanding bond.
Basically, when it comes to the leverage, we calculate according to the bond agreement, and that's based on an average EUR-FX rate over the last 12 months, and we provide that in the appendix of the report.
We have specific questions regarding we're referring in the report to high comps related to COVID traffic. How does LINK define COVID-related traffic?
The COVID-related traffic are defined in the numbers that we have supplied in the fourth quarter report and presentation, based on certain clients that we know signed up for pure COVID-related traffic.
We have a detailed question on the change in number of employees from the Q3 to the Q4 report.
I can start with that. We have seen an increase, of course, in the number of employees in the U.S. after acquiring a customer stock. We had to onboard some more employees there to operate the customer base. We have also done a lot of reductions in OpEx, including employees. Those employees are still counted as active because they are in their resignation period, and we do not sort of take them out of the employee list before the resignation period has ended.
On the U.S. acquisition base that was acquired in Q4, how will that impact the gross profit margins in the U.S.?
Oh, that's a good question from Morten.
Yeah.
I think the this customer stock is more sort of what we have in the other entities, more normal AP messaging customers. For the fourth quarter, that would impact the margin about 5-6 percentage points.
There really was quite a lot of restructuring costs in the Q4. How does LINK see that in 2023?
Morten, you want to take that one too?
I think as we progressed pretty good on the programs cost initiatives, during the fourth quarter, we took the substantial share of expected cost in the fourth quarter. There will be some into the beginning of this year as well, when we sort of do the remaining parts, but we expect it to come severely down from the Q4 level. We have a specific question on the CapEx and the guiding for the level of CapEx.
We have not given a specific, forward-looking statement for CapEx. We have discussed this historically, and we've said that we are aiming for the CapEx level to go down from the previous run rate of NOK 180 million down to around NOK 150-NOK 155, based on the CapEx savings that we have communicated. The ambition is the same. As you saw from the slide on the cost reductions, the contribution from CapEx is equal in the reforecast compared to the previous estimate.
I have a question on the weaker development for gross profit in Northern Europe. What were the main drivers behind that?
Yeah. For, it's on the gross profit. Yeah. We obviously had also a very strong fourth quarter in the Nordics, also driven by COVID traffic. Specifically for the fourth quarter, we also had to do an adjustment to our COGS estimates, which it also impacts in the quarter.
A broad question on the U.S. What's the potential market size for LINK in the U.S.?
That's a very good question, actually. I've done 30 something acquisitions in my years with LINK. The U.S. acquisition is the one that I see the most potential in with the current customer base. It is possible to double the revenue within a three to five -year perspective because of the size of the clients and the feature set of the products that we are having. On top of that, there is a lot of possibility in attracting new clients as well in the utility vertical, as the penetration rates are not very high. With the very big utilities, our best estimate on the penetration rates is around 30%, 30%-40%, and we are the dominant player. Within the smaller utilities, the penetration rates are significantly lower.
It's more difficult to estimate, but probably closer to 5%, around that level. There's a huge potential also on attracting new clients here. We have, of course, some tailwinds. Regulatory environment in the U.S., it's complicated. Each state has their own set of regulations. With energy efficiency, and end user expectations when it comes to service level and communication need or a need to understand sort of more what is happening with the power and gas supply, things should sort of be in our favor when it comes to signing new contracts and increasing the usage and the revenue.
We have a specific question on the EBITDA guiding for 12%-15% growth in 2023 on fixed exchange rate compared to 2022. What, what type of fixed exchange rate is that, and how does it relate to the current spot rate?
Morten?
I think we base this on the reported numbers that we have now. I think there are so many possible shifts in the FX rate. We just really base it on the reported, the NOK 625. Obviously the FX rate could grab that anyway. We expect to deliver on the reported basis, growth between 12%- 15%.
We have a question on the OpEx in Q4 which was quite high despite the ongoing cost initiatives. Any more comments on what drove that high level?
We see that coming from obviously the fair share of that is coming from the U.S. where we have done investments over the last year. Especially in the U.S., we also saw somewhat higher commissions related to the critical event messaging in the quarter. Then there's a more normalized level of sales and marketing activities also in the U.S. where it's more like after opening up after COVID, there's more sort of interaction with clients and those kind of drives a bit of a cost. Then there's the general salary inflation and other inflation effects on our cost base.
To the centralized billing system that is system which we are rolling out to all the entities, and that has sort of direct license costs, which we are will be offsetting by reducing the local billing costs.
Just a more high level comment from me too on OpEx. Q4 is peak season, and normally also have a higher OpEx level than the other quarters. More sales provisions as the revenue and gross profit is higher, and also more provisions to partners and more activity on on the sales side. More fares, more events that we are participating in. That would be sort of a normal way of looking at our OpEx between different quarters in here.
We have a question on some more color on margins in Western Europe and especially in Germany and the long-term potential as the industry moves away from simpler SMS type of messaging.
Maybe you want to take Some commentary on the specific margin development in Western Europe, and I can take.
This question about Germany, we report that under Central Europe. For Western Europe, we see sort of course, we had a rebound in more reader traffic in the fourth quarter, which impacts, but it's like a normal seasonality effect. Yeah, I think that's for Western Europe.
Long-term potential, moving away from SMS, I understand that to be when you get a more significant volume on the new OTT channels, what would be our margin expectations then? I can base my feedback on that on what we see now. We see a higher margin on OTT channels. If we get a higher percentage of the traffic on those channels, the gross profit would increase. There is also a potential, of course, when you reach a certain level of volume on the OTT channels, that the mobile operators, they will see that the growth momentum on SMS is lowering or even declining. That could enable quite an interesting mechanics if we're able to set the different channel owners up against each other. We sort of own the traffic.
We can funnel it, the way we want, and that could, such a setting could contribute to discounts or other interesting negotiations. As I said, the OTT channels, they have higher gross profit margins today. We expect that going forward too because of a richer feature set. If the traffic increases, then the margin should increase.
We have no further questions. Please pose any additional questions.
We aren't seeing any more questions, but let's give 20 more seconds or a half minute to make sure we pick up if somebody's writing something now.
As there seems to be no additional questions, we thank all participants and conclude the Q&A.