Good morning. Welcome to the Q4 2020 results presentation for Link Mobility. My name is Tom Rogan and I'm Head of Investor Relations. I'm joined by Guillaume van Gaver, CFO and Thomas Berge, CFO, who will present the results. Please post questions during the webcast for a Q and A session following the presentation.
Guillaume, please.
Thank you, Tom, and welcome to all of you for this interim report of quarter 4 2020. It's with great pleasure that I will start with actually 2 important points when starting this presentation, which will last roughly 30 to 35 minutes. Yes, these two important first points is that we are very happy to report that we have exceeded The guidance we gave in the context of the IPO in 2020, especially in Q4, and Q4 was quite a demanding month with important sessions in November December with Black Friday Christmas. So we're very happy to bring this good news to you today. We're also very happy to confirm the acquisition of Tismi, which brings additional capabilities and products and growth perspective for Link Mobility with this very unique company based in the Netherlands.
We'll cover that in one slide also later. But when we look at the results, we've been able to post a very strong performance in terms of growth, achieving 18% in our enterprise segment. And this is really important for us because that gives us confidence that in the mid- to long term, we are going to be able to sustain a 20% growth of our revenues. We have also looked at a very strong overall growth of 18% and EBITDA growth of 25%. That also shows that we are able to translate a lot of this good growth momentum in our financials with 11% EBITDA to revenue percentage.
If you look specifically on the organic growth, not taking into account WebSMS that we have acquired last year in November, then you can see that our growth rate is at 16%. And it's fair to take into account the fact that In our aggregated business, which is high volumes and low margins, we had actually a small decline compared to Q4 2019. What is great at Link is that we have strong growth in our customer base with 40,600 customers and a very good net retention rate of 116%. Another very good story for us, which is very important, is that we've been able to refinance the company with the issuance of a €200,000,000 bond, which is very helpful for us to actually lower interest costs but also give us the weapons and the tools to continue our growth, especially through M and A. Yes, we have also some very good tailwinds.
We've expressed and presented this during the IPO process, And we have all seen how many more companies are looking at expanding their digitalization, how much government need more digital tools in order to get in touch with their citizens. We've seen that mobile is at the center of the communication. And what is great for us moving from A2P to CPaaS is that companies are coming to us for more and more conversation solutions. So really strong tailwinds helping CPaaS players in the industry. Let's have a look in a specific country how this looks like.
1st, from a French perspective, we've seen that Link Mobility acquired a significant position with the acquisition of NetSize in 2019. We are now rebranding Link Mobility France, and we are definitely using Link Mobility as our enterprise brand. But if you look at numbers in 2020, in France, the A2P market and the Messaging market have actually grown by 11%. Next to it, Link Mobility was able to grow by 33%, not only leveraging Its product portfolio is enterprise push, but also consolidating traffic through previous acquisitions. We have also deployed in 2020 more advanced solutions, software and tools for enterprise to do more advanced communications.
And we've been also recruiting new campaign success managers who are helping brands to implement new complex marketing innovative campaigns, but also new customer experience flows. And with those new tools and with those new ecosystem, we are actually able to drive the market with even an increased market share in the French setup. If you look at France also, we have grown recruiting more enterprise sales team at the end of 2020, But we've also launched the new partner channel, which we presented to you as well as leveraging our existing self signed up brands. All of this is definitely contributing and will contribute even further in 2021, 2022, 2023 to fuel the growth in the French market. Looking at France also, we have seen very good and positive signs on the launch of RCS, With the penetration rate now reaching 25% in 2021, at the end of 2020, we are seen up to 15% penetration rate.
And what does it mean? It means that we can now offer much higher return for our partners in terms of marketing campaigns and customer experience, RCS flows. And we do this with tools which enables first the use of RCS and the fallback solution with a web experience using the traditional SMS for those devices that are not RCS compatible. All of this is really bringing strong innovation in the marketplace. And as one of the operator mentions, Link Mobility has actually launched the most innovative campaign with 1 of its partner in 2020.
More generally speaking, as we present it, we are in good shape when it comes to rolling out SSU and also the partner channel. Both of them will contribute to this 20% mid- to long term growth objective we have. We've been launching in Sweden SMS API, and the first results are exactly according to our plan, which gives us confidence in continuing investing in self sign up. Also, with the acquisition of WebSMS in Austria, we get a unique access to the DACH region with Germany and Switzerland having high potential. On the partner channel, we've been able to recruit partner managers in new footprints.
And when you look at the results, we've been able to actually recruit 12 new partners in Q4. And if you look at the partner channels, they themselves contributed to the acquisition of 147 new customers, proving the case that partner is important for this CPaaS industry. When we looked also at the market development for 2020, Our investment case remains very strong, I. E, the countries where we have the highest penetration continue to grow with double digit, But the growth is even higher in countries like Germany, Spain, Italy and others where you can see that the growth rate is strong and enables us to actually continue this journey of pushing new CPaaS solutions all over Europe. If we look at Liq's position in the end of 2020, I told you in the French case that we have gained market share, and that is the case in a lot of other countries, and we are holding strong market 1 positions, not only in the Nordics but in other countries in Europe.
Clearly, Link Mobility has had a good 2020 when it comes to market share growth and positioning more advanced products. That's also illustrated by the wins we had in Q4. And we like this slide a lot because it tells you how enterprise focused we are, also how diverse we are as a company being able to win new customers in a lot of our footprint with some interesting products such as mobile identity, KYC products, SIM swap solutions, also in this case, for instance, in Denmark, a plug in with Microsoft Dynamics, this multichannel using Viber for debt collection in Bulgaria. So when you look at the most important wins, they are very diverse from a geography standpoint and from a use case standpoint, which is great. But let's look at 2 specific cases.
The first one is the Emirates College of Technology in UAE. With this customer, and it's not often the case, we have won a bid to actually offer a range of new channels and conversation solution in one go For all of the students who have a complex interaction with university due to COVID, and we've implemented these tools which enables them to book courses to actually evaluate their courses, but also participate to a lot of the university events using WhatsApp, using SMS using chat and conversation solutions. So really an interesting win for us that we have done in partnership with Voraqual. That gives you a good illustration that now more and more, even from the get go, we get customers to buy the most advanced products. Another good progress we've made is regarding the linked mobility solutions implemented in customer service.
We have not decided to build our own customer service softwares but to partner. We have signed a partnership with Conversation24 to expand in the DAS region solutions that mix chat and also mobile messaging channels. And we are providing the mobile messaging channels, and we have a combined go to market strategy where they can propose additional channels to their chat customers, and we can embed their software, including Chart, to also our customers. And together, these go to market plans have been put together to expand is a fantastic also illustration of our ways of working and the strategy that we want to implement for us. But let me finish with 2 important slides, one regarding Tisme.
Tisme is definitely a great acquisition from Link Mobility, acquiring unique capabilities because Tisme has operator license agreement in 8 countries in Europe, which gives them the right access to technology, but also things like mobile numbers, up to 640,000 mobile numbers in inventory, also with fixed mobile number fixed numbers up to 70,000. We've paid $20,000,000 in cash for the acquisition, but this is a company that has very strong growth momentum and will be able to complement our offering for enterprise but also serve some large companies with unique solutions on mobile originated and mobile terminated messages of the likes of Google, for instance. For us, really some fantastic news. And the last slide before Thomas presents the detailed financials is about our forward looking statements. Nick Bobricki has been in the market for long, and we've been always very pleased to announce us overachieving guidances and outlooks.
And now we've decided that we will give you more specific dates when it comes to achieving the NOK10 billion milestone, and that is something we are seeking to achieve in 2024 on a pro form a basis. And in 2024, we have the outlook of having a profitability of 13% to 15%. Of course, that might be slightly influenced by the M and A pipeline and how much profitability our targets have. And this reason for us being much more specific around the €10,000,000,000 mark and the 13% to 15% profitability is that we have 3 key elements that are pushing us in the right direction. First of all, strong demand in our products, go to market expansion, which is what we told our investors that in the mid to long term, this will helped fuel a growth rate of circa 20%.
2nd important reason, through scale, we can actually translate more of our gross profit into EBITDA, which means that this is going to fuel our profitability going forward. And last but not least, we can confirm to you that We still have a very strong pipeline on M and A, very good discussion with companies who are intending to join Link Mobility to help them move from an A2P to a CPaaS provider. And with these M and A discussions, of course, we will secure Link Mobility Growth and also expand beyond Europe as we want to be a worldwide leader in CPaaS. Thank you very much for this quick introduction. We're now going to look in more details to Q4 numbers with Thomas.
Over to you, Thomas.
Thank you, Giunga. Let's start with the financial section with a more detailed summary of the outlook given for 2020. The company is happy to report that the outlook for the full year of 2020 was overachieved. For comparability reasons, I will start explaining a change in accounting policies. Revenue recognition from gross revenue to net revenue bookkeeping was implemented in the Q4 regarding direct carrier building in Romania, Bulgaria, and Northern Macedonia.
The change was based on a yearly assessment together with our auditor. As a result of the review with the auditor, Linq decided it was more prudent to perform a net revenue recognition based on the underlying client agreements and RS15. Net revenue recognition means that Link will report gross margin as revenue instead of reporting billed revenue and connected COGS separately. In the attached table, the impact is reported at -61,000,000 on revenue full year 2020 and minus SEK14 1,000,000 in the 4th quarter. Revenue versus the outlook on a comparable basis ended at the high end of the scale at $3,576,000,000 or exactly $3,600,000,000 including acquired entities on reported revenue basis.
Overdelivery on EBITDA with an organic adjusted EBITDA of $384,000,000 plus $14,000,000 more than the outlook. Adjusted EBITDA including acquisitions on reported basis was 391,000,000. Regarding pro form a figures, a revenue of $3,682,000,000 and an adjusted EBITDA of 430 €5,000,000 including WebSMS for the full year of 2020. This does not include the most recent acquisition of TSMI, which is expected to generate approximately €7,000,000 in revenue and €3,500,000 in adjusted EBITDA for 2021, continuing the high underlying growth of the company. Some growth metrics on the next slide.
Strong performance in the enterprise segment with an organic growth of 18% as the graph on the lower left side show, The growth rate is increasing over the last quarters. The Enterprise segment is at the heart of Link's strategy, and it is this segment which is going to take the company to the mid to long term revenue growth target of 20%. Link is investing in go to market initiatives and rolling out new products in new markets. Although these investments on the commercial side are boosting growth levels through 2020 and will generate growth going forward. Global Messaging and Aggregator revenue are diluting total revenue organic growth to 16%.
Aggregated revenue is low margin traffic from other players in our industry do not have direct connections to the relevant mobile operators. This traffic is price sensitive and is more volatile compared to the stable and sticky enterprise segment. Link accepts low margin aggregated volume as it enables discounts from the mobile operators, thereby fueling profitability in the enterprise segment. In the Q4, Link had achieved many full year discount arrangements and therefore consciously decided to accept less aggregated volumes as it was not needed to achieve the discounts. The Q4 is mobile marketing heavy due to the Christmas season.
This year, we observed a smaller negative effect on volumes due to government restrictions on retail stores, mainly in Western Europe. Other sectors experienced growth, like logistics and e commerce, but the net effect for Link was a 3 percentage point reduction in growth rates compared to a quarter with normal seasonality. Going forward, Link expects large volumes from the retail sectors as societies open up for normal activity, hopefully during 2021. The next slide shows growth rates for regions. Looking at Northern Europe, we see a high and increasing growth rate driven by a strong intake of new clients, together with a good momentum on upselling activities of more advanced products and use cases.
This region has also experienced less government restrictions in the Q4. Same trend for Central Europe Well, logistics, e commerce and the financial sector is growing rapidly, observing softer volumes in the Q4 from the retail sector in this region, but the retail sector constitute a lower portion of the revenue base compared to, for example, Western Europe, so the impact is minor. In Western Europe, the new channel like RCS and WhatsApp are attracting a growing interest in the market, as Guillaume mentioned. New channels are growing rapidly in volumes and more advanced solutions and use cases are emerging in this region due to the richer feature set of the new channels. An organic growth rate of 9% in the 4th quarter showing a negative effect due to closed or materially restricted public access to stores and shopping The industry expects an uplift in communication and messaging volumes from the retail sector when societies are open and operating more normally.
Moving over to some KPIs. Year over year, the customer has organically increased to 3,800 customer accounts. Linked now has over 40,000 customers. Net retention rates for the enterprise segment increasing over time and is reported at 116% for the 4th quarter. Net retention is positively impacted by wider product portfolio and go to market initiatives, driving upselling of new solutions and use cases to existing clients.
The next slide is about gross margin 1 and EBITDA. Stable gross margin development over the year with a reported margin of 25.3% for the 4th quarter, Gross margin growing organically 14 percent. All time high adjusted EBITDA of €119,000,000 which is 24,000,000 increase compared to the same quarter last year. Organic growth on adjusted EBITDA basis was 18%, higher than both organic revenue growth and the gross margin growth. Link is operating a very scalable business model where a large amount of revenue can be added with only modest OpEx increases.
An all time high gross margin EBITDA conversion of 45% documents the scalability in the business model. The P and L Full year revenue reported was €3,539,000,000 or growth of 22% and organic growth of 18% for the full year of 2020. Gross profit at almost 900,000,000 And organically, gross margin grew by 14% for the full year of 2020. Adjusted EBITDA at 3.91, organic growth of 21%. Non recurring costs at €97,000,000 for 2020 due to M and A costs, Cost in connection with the IPO and synergy realization programs.
Net finance cost for the full year 2020 was minus SEK 4 27,000,000. Interest cost was high in 2020 due to the previous credit facility, with higher debt levels and almost twice the interest rate compared to the current bond financing. A net non cash currency cost of SEK 101,000,000 and amortization of transaction costs related to the previous credit facility of SEK 74,000,000 are increasing the net finance cost. But as I said, these two last elements have no cash impact. Over to the balance sheet.
Solid balance sheet after the IPO. Total balance sheet is at $7,600,000,000 with an equity ratio of 55%. Working capital is negative, meaning that Link's clients and vendors are financing the organic growth. Linx secured a bond placement in December with a fixed coupon of 3.375 percent and thereby almost reducing the interest cost with 50% compared to the old financing arrangements. Yearly interest cost is estimated at NOK 70,000,000 assuming no new uptick on debt.
Leverage as of December 31st calculated at 2.7 being significantly reduced compared to 2019 due to primary proceeds from the IPO in October. Moving over to a cash overview on the next slide. Cash flow from operating activities at 161,000,000 positively impacted by improvement in working capital of 54,000,000. Cash out on M and A is connected to the purchase of WebSMS. Interest cost in Q4 paid for the last 6 months reduces net cash flow in the Q4.
That was, of course, a similar upside in the Q3, which we informed you about. Non M and A cost is mostly due to the implementation of the auction scheme and other costs directly related to the IPO. That's all for me. Thanks for listening in. I'm handing the word over to Tom to take us through Q and A.
Welcome to the Q and A session. First questions comes from Petrog Savjanovic. And the first question he has is on FX effects on the growth of in the revenues.
So thank you, Pedrik, for the series of questions you've raised and the first one in regarding the FX. So Link Mobility, since the IPO process, is reported in NOC, and we have decided that we will to this NOK reporting. It's obvious that the NOK reduced to the euros just a year ago. So that has an impact in the reported growth rates, whether organic or non organic.
The next question from Peter is related to the growth in the new channels and the trend of the revenue share coming from CPaa Solutions in 2021 2020 and then 2022?
Yes, Peter, very good questions, especially on the notion of more conversation. Now we use already conversational solutions for our customers, for instance, for customer survey solutions where We ask and we collect answers from customers. And with the growth of new channels such as RCS, these use cases will grow. We believe that we will have conversational solutions reaching in the region of 5% to 10% of our total use cases going forward.
The final question from press release related to the payment service directive, the PSD2, if there's any update on that from Link.
I'm very impressed by the depth of your research on the PSD2 elements. I would say that for us, in general, 2 factor authentication is a growing market and is growing by more than double digit. But if you look specifically at PSD2, I would say that we will have a growth which is similar to the A2P traffic growth, but not necessarily as strong as CPaaS in general because In certain countries where SMS price was high, you also saw the effect of bank implementing application authentication. Now in general, as your research showed, there is more and more situations, so to say, where authentication with SMS and also voice can be a very good and growing use case. So in general, we are very positive on 2 factor authentications and also on the impact of directives like PSD2 because The world is needing authentication solutions as there is more and more payment worldwide.
Next question comes from Arshten Nudgol. And the first is, can you say something about the historical growth for tisme?
Arjestan, very good question. So tisme is a company that is growing actually in line with the kind of CPaaS growth rates. You know There is a difference between CPaaS growth rates, which are closer to 30% plus and A2P growth rates, are closer to 10%. And we are linked with a company that is moving from A2P to CPaaS. But TISM is already kind of a CPaaS company growing above 30% if you look at the 2020 numbers.
Eisdon has a follow-up Regarding the EBITDA for TISMY and revenues in 2020, I'm not to expect for 2021?
I think for 2021, we are As Thomas was saying, roughly €7,000,000 of revenues and €3,500,000 on EBITDA. And we know that This is a company that will also bring some benefits in the rest of Link Mobility's business on enterprise, for instance.
Then we have a question from Julian Serafini. The first one is back to Tisme and the rationale for the acquisition.
Of course, the rationale is that you will see that linked tisme brings this CPaaS capabilities that are going to be very useful for Link Mobility in general, let me give you a few examples. So for those operator licenses, Tisme would have more than 620,000 mobile numbers and around 80,000 fixed numbers that we can use for certain use cases when shortcodes are not the right solutions. For instance, It's used for number masking. When you have deliveries from a driver that is seeking to confirm the presence of the person who received the parcel, Then we are using number masking, and TISMI has such capabilities with voice, but also for 2 factor of modifications. We have unique solutions that are used with TISMI and with blue chip customers using the technology from Link now that we have acquired Tisme.
So clearly, Tisme brings mobile originated, mobile terminated 2 factor authentication voice solutions that are very in high demand in the CPaaS industry. So for us, it's a very good and strategic acquisition.
Who do you have a further question on the volumes currently from the new channels, RCS and WhatsApp?
So as said, those volumes remain slow and low, below the 5% worldwide. And there are many reasons for this. First of all, RCS has, for instance, in the most advanced countries, only a penetration rate of 15%. So you need to get further expansion into the latest Android software alliance in order to expand on RCS. And the use cases from WhatsApp are starting mostly on customer service from a very low base.
We also have a little bit of delay with the changes of the WhatsApp policy regarding more commercial usage of WhatsApp going forward, which has been pushed to May 2021. So all in all, it remains small, but there is a very high growth rates and a lot of conversation with our customers to have a multichannel approach that is one of the foundation of CPaaS.
Yes. Julien has a follow-up regarding the revenue per message that has been increasing and the reasons for that?
Yes. Do you have an increase in revenue per message overall for the company, that's a very good question due to several factors. First of all, as we said, there's more advanced use cases commanding a higher price per message, number 1. Number 2, we've implemented also some price increases in certain countries, especially in the Nordics. Number 3 in our mix, especially due to things like COVID, we have had higher growth in less impacted countries, which tend to have a higher price, and that is the case, for instance, in the Nordics.
Last but not least, and that's clear, that on the revenue per message, when you look and when you look up the numbers in NOK, you will have also the currency effect. So all in all, the underlying trends, which is is important for us is that we are capable of increasing the revenue per message due to more advanced CPaaS solutions and also the fact that we are deploying more and more complex solutions within our enterprise customers.
The next question comes from Peter Komsley and it's related to the assumption behind the guiding for 20% organic growth in the mid to long term.
Peter, we believe that we are in the right trajectory to deliver in the mid- to long term a 20% organic growth rate, and that is on the basis of our focus on enterprise, the fact that we are launching new CPaaS propositions with more conversation, more OTT or RCS. We have also a very ambitious plan that is coming together, which is related to go to market where we make investment in sales sign up in several countries and also in partner. So you can see that these investments that we have started in Q4 2020 will bear fruit in 2021, but most importantly, in 20222023. And they're going to drive also the growth rate from Link Mobility going forward.
There's a further question from Peter regarding the 13% to 15% EBITDA margin guidance and the drivers for that and specifically how M and A could potentially impact that?
Peter, we are looking at acquiring companies that are from the A2P space, but also from time to time also bringing solutions that are very important for us from a CPaaS perspective, which was the case of Tismin. And you know that when you acquire company, they can have different profitability profiles. So it depends on those profitability profiles when We look at the guidance on 13% to 15%, whether we've been acquiring a lot of A2P customers with lower EBITDA ratios of in the region of 10%, which is kind of a norm in the industry. But all in all, we feel confident that in aggregate level, We are going to be able to scale our business. The gross margin conversions to EBITDA is continuing to grow due to the fact that we don't need to invest as much being fueled by the tailwinds of our industry.
Maybe, Thomas, do you want to add a few elements on this guidance
Yes. The way I understand the question from Peter is basically if you look at this organically is 13% to 15%, the interval that we Scalability in our business model will have a larger improvement on EBITDA, but that M and A will reduce it, as you said, beyond the ATP players, which we will acquire a lot of they have lower margins, usually 10% or below and that will dilute the total margin. So this is sort of the best estimate including M and A.
The next question comes from Mats Rosendahl and he is looking into the competitive situation with Singe regarding if Link is winning customers from Cinz or if Link is competing in the same region as Cinz, for example, Sweden?
Very good question, Mats. Thank you. We have continuous competition, of course, in the market. But this is an industry in general with low churn. So we haven't any we don't have any customers to report, which we have lost against Cinch or customers that we would have won against Cinch specifically in Q4.
Again, there's a lot of growth from our customer bases to acquire new customers. And for the time being, we don't see a significant competitive risk nor do we see that we have a magnificent and benefit in capturing all of Cinch customers. Let's put it this way.
Pestan, Nudgaard has a further question regarding the timing of the increase guided in the underlying growth in 2021 compared to 2020?
So if I understand the question, We are basically looking at 2021 with a lot of elements to in our minds, of course, versus 2020. First of all, in 2020, you would have had some exceptional weeks and circumstances. For instance, in March 2020, we used Link Mobility Service for informing the society in general for the implementation of lockdowns, we have had weeks with massive, massive growth compared to normal run rates. And this will not happen in 2021. But in general, When you look at 2021, first of all, we are expecting in the second half of twenty twenty one a positive impact because A lot of our customers will need to reinject marketing activities, engagement with customers to regain the normal run rate of their own business, and that's where Link Mobility solution will be on high demand.
So we believe that 2021 will be favorable in terms of growth rates versus 2020 underlying because of the return to a more normal situation and the fact that our marketing use cases are very strong. So that is one of the elements why we are more confident in 2021 from a messaging volume perspective versus 2020. We are also looking at the expansion of go to market initiatives. We are starting to bring some fruit in 2021, even if more of the growth is expecting in 2022 and 2023 and also the expansion of more CPaaS products, as explained. So all that combined gives us confidence that the 2021 growth and underlying kind of usage of our products will grow.
We have a question from Rami, the courier and he is asking regarding 2 factor authentication. It has a volume business with low margin and how that fits with the strategy towards more CPaaS?
So, I mean, 2 factor authentication is done currently with things like SMS, but we are, with the acquisition of TISMY, for instance, going to be able to offer 2 factor authentication with voice and other solutions. So we are going to have a more multichannel offering, which also commenced at a higher price because we come to our customers with a range of solutions. I just highlighted in our customer wins that A dunning company is using Viber in Bulgaria to actually collect more payments. So you can see that CPaaS is coming to the market in 2 factor authentication and also in other business areas. So for us, CPaaS means growth in marketing, in customer experience, improvement flows in customer service, also in 2 factor authentication, and we expect really some positive momentum on that product specifically.
Thank you very much. This concludes the Q and A session. For further information, please contact Investor Relations.