Good morning, everyone, and welcome to LINK Mobility's third quarter 2026 presentation. Joining us today are Thomas Berge, our CEO, and Morten Edvardsen, our CFO. You can submit questions at any time through the Q&A function in the webcast, and we will address them after the presentation. Thomas, over to you.
Thank you for the introduction, Christian, and good morning to everyone listening in. I am pleased to report that we delivered 7% organic gross profit growth in the quarter, bringing us back to high single-digit growth and what we consider normal growth levels for LINK. This represents an acceleration of 5 percentage points quarter-over-quarter and was at the high end of our expectations. The improvement was driven by stronger performance in the enterprise segment. Organic adjusted EBITDA also grew 7%, demonstrating that the improvement in gross profit is translating into stronger earnings growth. With Q3 delivering at the high end of expectations, we are raising our organic gross profit growth expectations for H2 to high single digit, meaning an estimated gross profit growth of high single digit for Q4 also.
Looking into 2027, the current trends and commercial momentum support high single-digit organic gross profit growth in line with our medium-term ambition. The underlying commercial indicators remain strong. Gross profit from new contract wins was EUR 41 million in the seasonally slower third quarter, with CPaaS accounting for close to 50%. We continue to see a positive mix shift towards higher value CPaaS solutions, which we believe will support both growth and value creation over time. We see AI as an additional structural tailwind with the potential to drive higher messaging volumes and increased adoptions of richer conversational channels. Our strong balance sheet and highly cash-generative business model allows us to continue investing in organic growth and value-creative M&A while increasing shareholder returns.
For the fiscal year 2026, we expect shareholder distribution of NOK 330 million-NOK 400 million, representing an increase of approximately 10%- 33% compared with fiscal year 2025.
At current valuation levels, we see share buybacks as the preferred form of shareholder distribution. I am pleased with the execution in Q3. We are back to high single-digit organic growth and observing commercial momentum to support similar growth levels going forward. This reflects strong execution across many parts of the organization. Strong organic growth is fundamental to LINK, not only because it drives earnings, it gives us greater capacity to reinvest in the business, pursue value-creative M&A, and increase shareholder returns. LINK delivered another strong quarter for contract wins. Gross profit from new contract wins amounted to EUR 41 million in Q3, a strong level considering the slower seasonality during the summer months. Commercial activity remained robust throughout the quarter, and both the pipeline and customer demand continued to develop positively. We are particularly pleased to see a higher share of contract wins coming from higher value CPaaS solutions.
CPaaS contributed EUR 20 million in the quarter, accounting for 50% of total contract wins. Within CPaaS, momentum remains particularly strong in conversational OTT, with new contract wins growing more than 50% year-over-year, driven by channels such as WhatsApp and RCS. This is strategically important as the improving mix supports both growth and gross profit quality over time. I am pleased with the performance of our sales organization, which has delivered consistently strong results over the past several quarters. LINK's sales teams are increasingly effective at bringing our broader CPaaS offering to the customers. Initiatives such as our sales academy are supporting this development and strengthening our commercial capabilities across the organization. We expect CPaaS to represent an increasing share of new contract wins going forward. Increasing AI adoption should expand the use cases for richer and more conversational communications, creating additional opportunities for our sales organization.
Another key opportunity is RCS, with the broader Nordic rollout expected in 2027. Our Nordic sales teams are already preparing for this and are increasingly equipped to sell new use cases across richer communication channels. I expect RCS to become an important growth driver for our Nordic business over the coming years. On the next slide, we go into this opportunity in more detail. I am happy to inform you that the rollout of RCS on iPhone in the Nordics has now started finally. In September, Tele2 became the first Swedish operator to activate RCS on iPhone, which we see as an an important step for broader RCS adoption in the Nordics. We expect additional operators to follow in Q1 next year. Until now, RCS adoption in the Nordics has been limited by reach, with the addressable market primarily restricted to Android users.
For many customers, that has made it difficult to move meaningful messaging volumes to RCS. As RCS becomes available on iPhone, this dramatically increases penetration rates from today 20%-30% to 80% plus. RCS will then be a relevant channel for enterprises and create the basis for broader commercial adoption and accelerated growth for LINK. What can we expect from the RCS rollouts in the Nordics? We believe France provides a relevant reference point, as it is a more mature RCS market where the services are available across both Android and iOS since last summer. For France, volumes have scaled rapidly from around 6 million in 2023 to an estimated 80 million in 2026. This gives us a good indication of the potential of RCS as adoption increases. The development in France has been strong, but we believe adoption in the Nordics has the potential to move even faster.
The Nordic market is digitally mature, with enterprises and consumers accustomed to advanced digital communication. Customer readiness in the Nordics is higher than it was at the similar stage in France. Many of our customers have already been testing RCS through pilots and POCs, giving us a stronger starting point for adoption. LINK is also better prepared. We can leverage the commercial and operational experience we have built in France and apply that playbook directly to the Nordic rollout. We believe AI will further accelerate adoption by making it easier for enterprises to create content and launch more advanced conversational RCS campaigns. The starting point for the Nordic is strong. The market is ready, our customers are ready, and LINK is ready. I expect RCS to become an increasingly important growth driver for our Nordic business over the coming years.
Turning to AI, we see this as another important growth driver for LINK. More specifically, we see AI creating the following long-term tailwinds for our businesses. First, higher messaging volumes. AI makes it significantly easier for consumers to respond and interact with businesses. The example on the bottom left illustrates this, as AI agent can interpret a flight change, check the customer's calendar, and help prepare a response. By removing friction from interaction, we believe AI can enable more frequent and multi-turn conversations. This enables accelerated growth on higher margin and richer channels like RCS and WhatsApp. Greater complexity. Enterprises already communicate across multiple channels and internal SaaS solutions. AI agents will add another layer. This is positive for LINK, as greater complexity increases the value of having one trusted provider that can orchestrate customer communication across channels and use cases. Lastly, increased value of trust.
As AI increases the risk of fraud, spam, and impersonation, secure and trusted customer communication becomes even more valuable. This plays directly to LINK's strength. We have spent more than 25 years building trusted relationship with enterprises. LINK is well-positioned to win in this market. Our position has already received external recognition, with LINK named a leading challenger in conversational AI by Juniper Research in 2026. We want to establish LINK as a leading player in AI-powered customer communications, building on the following: MyLINK Connect enables intelligent orchestration of AI-powered customer interactions across channels, also providing AI agents. Our AI capabilities help customers create and automate richer campaigns and conversational experience. The trust we built over more than 25 years gives us a strong competitive position towards existing customers and our market reputation. At its core, LINK helps businesses reach consumers and end users as effectively as possible.
Consumers are best reached on the channel they use daily for person-to-person communication. This is why read rates and response rates are superior in SMS, RCS, Viber, and WhatsApp versus email. Consumers use this channel every day, and that provide a point of contact for businesses to engage directly with the end users. AI might change how these interactions are managed, but enterprises will still need to reach the consumer as effectively as possible, and will do this through LINK. Overall, we believe AI will become an important growth driver for LINK over the coming years. It should drive more communication, increase the need for richer channels, and make trusted orchestration increasingly valuable. We believe LINK has the customer relationships, the platform, and the market position to capture that opportunity. In June 2025, we announced the acquisition of SMSPortal.
This is a significant transaction for LINK, giving us the leading position in the South African A2P market and a significant step-up in both earnings and cash generation. We remain pleased with the acquisition and the quality of the asset. SMSPortal is the number one A2P messaging provider in South Africa, with more than 5,500 customers and approximately 16 billion messages sent over the last 12 months. That said, growth over the past two quarters has been below what we expect from the business. SMSPortal growth will naturally be more variable over time, given the customer concentration. Meaning the 20 largest customers represent a higher portion of the P&L compared to our European enterprise business. We expect growth to improve going forward and remain confident in the long-term potential of the business. Looking specifically at Q3, the softer development was primarily related to international business.
SMSPortal benefited from a higher level of international business in Q3 last year, and that uplift or seasonality did not replicate this quarter. The year-over-year comparison becomes more equal in Q4, and we therefore expect gross profit growth to improve. The underlying domestic business tells a different story and continues to perform well with mid to high single-digit growth, supported by new customer wins and net revenue retention rate of 104%. We observe a healthy commercial pipeline across SMS, while WhatsApp represent an additional growth opportunity as we move into 2027. The chart at the bottom gives further visibility into the growth ahead. New customer volumes have ramped up somewhat slower than initially expected, primarily due to longer implementation timelines on the customer side. But the important point is that these volumes will come through with a further 670 million messages in the backlog still to be implemented.
We expect low single-digit gross profit growth year-over-year in fixed currency in Q4. The current run rate on domestic traffic, contract backlog, and pipeline supports a return to mid to high single-digit gross profit growth going forward. SMSPortal has significantly strengthened LINK's earnings and cash generation. The domestic business is growing well, and the substantial volume still to be implemented gives us confidence in stronger growth ahead. LINK is a highly cash-generative business, and this cash will be allocated to achieve the highest possible long-term shareholder value creation. We are pleased to announce that we expect shareholder distribution for FY 2026 to increase to NOK 330 million to NOK 400 million, compared with NOK 300 million for FY 2025. This represents an increase of approximately 10%- 33%. At the current valuation levels, share buybacks followed by cancellations remains our preferred form of distribution.
As illustrated on the bottom right, this could result in a cumulative reduction of approximately 11%- 12% in outstanding shares compared to 2025. We have the capacity to do this while continuing to invest in the business. Our strong cash generation and balance sheet provide financial flexibility to fund organic growth and value-accretive M&A while increasing shareholder returns and remaining within our leverage policy. Value-accretive M&A remains our first priority for capital allocation. We have delivered consistently on that priority. Since 2025, we have completed seven acquisitions, of which six were bolt-ons and one larger level-up acquisitions. The six bolt-ons have strengthened our position in existing markets, adding local scale, customer reach, and earnings. SMSPortal represents a level-up acquisition that gave us a leading position in a new market, a strong technology platform, and a meaningful step-up in cash generation.
We see strong growth potential in the South African market over the coming years. Looking ahead, selective bolt-ons in existing markets will remain an important part of our M&A strategy, and we maintain an active pipeline of opportunities. At the same time, we are ready to pursue level-up acquisitions when the right opportunity and market conditions align. We have both the financial capacity and the experience to act when the right opportunity comes along. Overall, M&A remains central to how we create value and deploy capital. We will continue to pursue attractive bolt-on opportunities while being ready to execute level-up acquisitions when the right conditions align. We have raised our H2 2026 organic gross profit growth from mid to high single digit to high single digit, following the clear acceleration in Q3 and the momentum we expect to continue into Q4.
Looking into 2027, current trends and commercial momentum support continued high single-digit organic gross profit growth in line with our medium-term ambition. On profitability, our scalable business model provides significant operating leverage. We have demonstrated historically that when gross profit accelerates, adjusted EBITDA can grow faster, and we expect that the operating leverage to become increasingly visible as growth strengthens. Finally, capital allocation. Value-accretive M&A remains our first priority. We have both an active pipeline and the financial capacity to continue executing. At the same time, our strong cash generation allows us to increase shareholder distributions while preserving capacity for organic investments and M&A, all within our leverage policy. Our priorities are clear. Deliver high single-digit organic gross profit growth, translate that growth into stronger earnings, and deploy our cash in areas where we can see the greatest potential for long-term shareholder value creation.
With that, I will hand the word over to Morten, who will take us through the financial section.
Thank you, Thomas, and good morning to all listening in. I am happy to report a Q3 that marks a clear step-up in LINK's financial performance compared to the previous three quarters. Organic gross profit and adjusted EBITDA growth both accelerated to 7% in stable currency, while acquisitions helped drive reported adjusted EBITDA growth of a solid 37% year-over-year. Based on the results, we increased our outlook for the second half while announcing our targeted shareholder distribution for 2026, which implies a 10%-30% increase versus the 2025 level. Let us now take a closer look at the financial performance for the quarter. Starting with revenue, reported revenue increased by 19% year-over-year to NOK 2 billion in the quarter. Acquisitions contributed significantly to the reported growth, while the strengthening of the Norwegian krone continued to represent a meaningful headwind.
Organic revenue growth accelerated to 6% in stable currency compared with 3% in the previous quarter, primarily driven by stronger growth within the enterprise segment. Organic enterprise revenue growth increased by 4 percentage points quarter-over-quarter to 10% in stable currency. Growth momentum improved across all enterprise regions, supported by improved net retention rates. Within global messaging, revenue declined 6% year-over-year. The decline reflects lower volumes from a few large customers, while the underlying customer and traffic mix developed positively. Turning to the bridge chart below, enterprise contributed NOK 125 million to organic growth, partly offset by a NOK 24 million decline in global messaging. Combined, the organic revenue growth of 6% in stable currency. Foreign exchange had a negative impact of NOK 111 million, or approximately 7 percentage points on reported growth, reflecting the appreciation of the NOK.
Acquisitions contributed NOK 327 million in revenue during the quarter, resulting in a reported revenue increase of 19% year-over-year. On a full pro forma basis, revenue growth was 5%, impacted by a slightly lower revenue growth in SMSPortal. The next slide shows net revenue retention and churn. Both metrics continue to move in the right direction during the quarter, with declining churn and further improvement in net retention. Enterprise churn declined further to 1.9% compared to 2.2% in the previous quarter. This represents a continued normalization towards historical levels and reflects the sticky nature of the business and our diversified customer base in terms of both industries, customer size, and use cases. Global messaging churn showed an even stronger improvement, declining from 2.2% in the previous quarter to 0.5% in Q3.
We are also pleased to see net retention strengthen another 2 percentage points quarter-over-quarter to 103% compared to 101% in Q2 and 89% reported in the same quarter last year. The improvement reflects positive development across both enterprise and global messaging and was an important driver behind the acceleration in organic growth this quarter. Net retention has normalized and is now close to our medium-term target level of 105%, supporting our growth targets. To the gross profit, one of the most important measures of performance for LINK. As Thomas highlighted earlier, we are very pleased to see organic gross profit growth accelerate back to high single digits, reaching 7% in stable currency compared to 2% in the previous quarter. Enterprise gross profit grew 7% organically, an improvement of 4 percentage points quarter-over-quarter, contributing NOK 23 million to growth.
The improvement quarter-on-quarter was supported by stronger volume growth, with particularly strong momentum in Western Europe. We are also pleased to see global messaging return to gross profit growth during the quarter, delivering 6% growth in stable currency despite the decline in revenue. This reflects a positive change in revenue mix and contributed NOK 4 million to gross profit growth. Combined, this resulted in organic gross profit of NOK 428 million and 7% growth in stable currency. Currency movements had a meaningful negative impact of NOK 25 million on gross profit, reflecting the strengthening of the Norwegian krone. Acquisitions contributed NOK 81 million, primarily driven by SMSPortal, and adds up to the reported gross profit growth of 21% year-over-year to NOK 484 million. On a full pro forma basis, gross profit growth was 5%, impacted by the gross profit decline in SMSPortal related to softer contribution from the international business.
Turning to the margin bridge below, organic gross margin increased to 23.9%, as slight negative mix effects within enterprise was more than offset by positive mix effects in the global messaging segment. OTT channels continue to deliver a significantly higher margin profile than traditional SMS, and it is worth noting that margin levels for signed OTT contracts remain stable. Including acquisitions with positive impact on margin, primarily reflecting the high margin level in SMSPortal, total reported gross margin was 24.1% for the quarter. Overall, we are very pleased with improvement in gross profit growth during the quarter, which was in the high end of expectations with stronger growth in enterprise and global messaging returning to growth. Further on to adjusted EBITDA, which represent another key financial KPI for LINK.
We reported adjusted EBITDA of NOK 268 million in the quarter, representing an increase of 37% year-over-year, supported by both organic growth and acquisitions. We are very pleased to see organic adjusted EBITDA growth accelerate to 7% in fixed currency, an improvement of 8 percentage points quarter-over-quarter and representing NOK 13 million in incremental EBITDA. The main driver of adjusted EBITDA growth is the improvement in gross profit growth, while organic OPEX growth was 7% in the quarter. Organic OPEX increased NOK 14 million year-over-year, mainly reflecting ordinary inflation and growth-related investments across the business. As for gross profit, the strengthening of the Norwegian krone had a negative impact on adjusted EBITDA, reducing reported EBITDA by NOK 11 million in the quarter. Acquisitions contributed NOK 70 million, SMSPortal adding up to the reported growth of 37%.
On a full pro forma basis, adjusted EBITDA growth was 5% or in line with pro forma gross profit growth. The organic adjusted EBITDA margin remained fairly stable year-over-year. Acquisitions had a significant positive impact on the reported margin, particularly SMSPortal with a contribution at a margin of 23%. As a result, the reported adjusted EBITDA margin increased from 11.5% last year to 13.3% this quarter. Overall, we are very pleased with acceleration in organic adjusted EBITDA growth during the quarter. Stronger gross profit growth translated into improved earnings growth, while acquisitions strengthened both reported adjusted EBITDA and margin. Let us now turn to the financial statements, starting with P&L and the items below adjusted EBITDA. Non-recurring costs amounted to NOK 18 million in the quarter.
The largest component was M&A-related cost of NOK 14 million, of which NOK 7 million related to the SMSPortal retention program and NOK 3 million related to acquisitions completed in 2026, and NOK 4 million related to runoff costs and ongoing projects. Restructuring costs amounted to NOK 4 million. Depreciation and amortization amounted to NOK 132 million in the quarter. Of this, NOK 70 million related to amortization of acquisition-related intangible assets, while NOK 56 million related to intangible assets from R&D. As we have highlighted previously, acquisition-related amortization does not require corresponding CapEx investments to maintain the business. Hence, it does not impact our cash generation and/or dividend capacity. Net finance expenses amounted to NOK 10 million during the quarter.
This included net currency gains of NOK 39 million, partly offset by net interest expense of NOK 45 million and NOK 3 million of other financial expenses related to the valuation of the ZAR Euro swap.
Net interest expense includes an NOK 11 million non-cash item recognized related to the SMSPortal earnout, while underlying interest expense of NOK 34 million was related to the outstanding bonds, working capital facility, and leases. On a year-to-date basis, net profit adjusted for acquisition-related amortizations increased by 74% to NOK 419 million, up from NOK 241 million last year. This solid year-to-date development therefore puts us on track for significantly higher dividend capacity in 2026, supporting our ambition to increase shareholder distributions to between NOK 330 million to NOK 400 million, significantly up compared to 2025, in line with our communicated shareholder distribution policy. Moving on to the balance sheet. LINK continues to maintain a solid financial position with capacity to support both inorganic growth and shareholder distributions.
Starting with the asset side of the balance sheet, non-current assets increased year-over-year, primarily reflecting NOK 1.5 billion from M&A additions, partly offset by foreign currency revaluation and amortizations. Trade receivables were also impacted by acquisitions, including approximately NOK 204 million of acquisition-related effects. Cash and cash equivalents amounted to NOK 721 million at the end of the quarter. The year-over-year reduction primarily reflects NOK 1.5 billion deployed towards acquisitions and share buybacks. Turning to the liabilities and equity side of the balance sheet, trade payables included NOK 185 million of acquisition-related effects, while equity ratio of 53% continues to reflect a solid balance sheet. Long-term debt consists of EUR 225 million in outstanding bonds and EUR 20 million draw on the working capital facility, with a total frame of EUR 65 million.
Net interest-bearing debt remains stable quarter-over-quarter and amounted to NOK 2.1 billion and impacted by an LTM working capital build of NOK 180 million at quarter end, with leverage at 1.9 x adjusted EBITDA. The expected normalization in working capital and continued cash generation from operations supports the deleveraging going forward. Leverage remains still below our policy of 2.0x-2.5 x adjusted EBITDA, providing LINK with continued financial flexibility to pursue our disciplined capital allocation strategy. To my final slides with some comments on the cash flow. Cash flow from operations amounted to NOK 63 million during the quarter and NOK 600 million on an LTM basis. The Q3 cash flow was significantly impacted by NOK 140 million working capital build, primarily due to normal timing effects, which are already normalizing into Q4.
Taxes paid in the quarter was NOK 52 million and significantly up year on year from biannual tax payment in SMSPortal of NOK 33 million. Adjusted cash flow from operations amounted to NOK 81 million in Q3 and NOK 688 million on a LTM basis. Adjusted EBITDA cash conversion was 67% on a LTM basis, demonstrating continued solid cash generation despite the temporary working capital build. CapEx amounted to NOK 43 million during the quarter and continues to primarily reflect investments in CPaaS solutions. We still expect CapEx to decline slightly in 2026 following optimization measures, while part of the resulting savings is being reinvested into AI initiatives to meet market demand.
On the financing side, interest paid and lease payments amounted to NOK 44 million during the quarter, including interest on our outstanding bonds and our RCF, as well as NOK 7 million of net interest related to the EUR/ZAR cross-currency swap.
After CapEx, interest, and lease payments, cash flow amounted to negative NOK 6 million in the quarter, reflecting the temporary working capital build. To sum up, we are very pleased with the financial development in the quarter. Organic gross profit and adjusted EBITDA growth both accelerated to 7%. Profitability improved significantly, and the business operations generated NOK 600 million in operating cash flow on an LTM basis. Together with our solid balance sheet, this provides us with significant financial flexibility to continue investing in organic and inorganic growth while increasing shareholder returns. With that, I will hand the word back over to Christian for the Q&A session.
Thank you, Thomas and Morten. We will now move on to the Q&A. You can still submit questions through the Q&A function in the webcast. Let's start with the questions we have already received. We will start with some questions from Halvor Dybdahl. "Can you give some more color on working capital movements in the quarter and LTM? Any extraordinary effects in Q3? What makes you confident in normalization in Q4?
Yeah, I can answer that one. Working capital tends to be, can be lumpy across quarters due to sort of payment behavior of 70,000 clients and also multiple vendors in each country. We had an effect in Q3 related to one of our biggest customers, which had some issues in their payment process. This is typical from time to time. Typically, issue purchase orders, and sometimes we go outside that, and then they need some internal approvals and so on. So that is basically explaining pretty much half of the working capital deterioration. The rest is coming from timing effects on operator payments and some sort of later payments in some geographies, which is also typical for Q3 due to summer vacations and so on. We already see these big customers already paid us in settled outstanding amounts into Q4.
We expect also to sort of normalize payment behavior on other customers into Q4. But it is always some timing effects. But typically, I would expect to see a normalization after such a big buildup.
Great. "How do you view the earn-out in SMSPortal? Can the lower growth year-to-date reduce the earn-outs?
We have one outstanding earn-out or conditional payment that is not linked to financial performance, so it will not be impacted by the growth in the company.
Thank you. OPEX in global messaging increased a lot year-on-year. Can you give some flavor on the drivers behind this?
Yeah, two drivers there. We have done some investments there to sort of robustify the solutions we have there to sort of safeguard customers and traffic. The rest is normal fluctuations and sort of inflationary items.
Great. Moving on to some questions from Eirik Rafdal in DNB Carnegie. Based on the CPaaS momentum you have had in the backlog over the past 12 to 18 months, gross margins should expand nicely in 2027. However, is there a risk that price pressure on A2P will offset the anticipated gross margin improvement from CPaaS?
The easy answer to that is no. Price is very stable in the enterprise segment. It is more volatile, of course, in the global messaging segment, as everybody knows. But in the enterprise segment, which is by far the largest business area for LINK, it is very, very stable. in 2026, price reductions are very small. It is well below NOK 10 million in yearly effect. We do not sort of foresee that to change. It has been stable for some time. We believe that the strong contract backlog is going to roll into the P&L and positively impact gross profit growth in 2027.
Good. Can you help us understand why SMS A2P new contract wins dropped 30% year-on-year?
Yeah. As I said in Q3 last year, that was exceptionally good on one contract, and that was due to a handful of contracts, sizable contracts, sort of being signed at the same time. That was on SMS, so that is the main reason for it.
Good. On the RCS rollout in the Nordics, previously, our impression has been that you have been cautious in terms of how swiftly RCS can have an impact on earnings in the Nordics. The market is there, but it will take a bit of time to see it come to fruition. Now it sounds like you are more confident that the Nordics can scale fast on RCS adoption. Is our read correct? If so, what has changed to make you incrementally more positive to the pace of deployment?
Take the last question first. We have always been super positive to RCS in the Nordics. The problem here has been the mobile operators not implementing RCS on iOS, and the penetration rates were too low for it to commercially scale. What has changed now in September, Tele2 came out in Sweden and introduced RCS on iPhones, iOS. Then from experience in other countries, that is sort of like a kicker for other mobile operators to follow as well. For the last two, three years, we have done POCs and tests with a lot of different clients in the Nordics on RCS. We are ready, and as I said, the clients are ready, so we are just waiting for the connectivity part to be present, so the penetration rate goes from 20%, 30% to 80% plus.
Then we think that this is going to have a much quicker pickup than what we have seen in other regions.
Thank you. What was the contribution from isolated decliners in Q3?
This was pretty in line with the previous quarter, and then pretty in line with last year as well, I would say.
Good. With acceleration of shareholder distribution, is it fair to assume that you will only do bolt-on next year and not targeting level up M&A?
As I said, bolt-ons are the first priority on M&A, and in order for us to sort of reprioritize larger acquisitions, then certain conditions among sort of our share price, our own valuation needs to be, certain standard needs to be met. Larger acquisitions, there we will partly pay with our own share. So that, of course, the current valuation on our own share price then is more important. We are talking to level up targets as well, keeping them warm, but we are not ready to re-engage aggressively as of now.
Good. Then a question from Bharath Nagaraj in Cantor. Organic adjusted EBITDA grew 7% in line with organic gross profit, leaving the organic margin flat year-on-year as the NOK 27 million gross profit gain was matched by NOK 14 million of OPEX growth. Against the scalable model, EBITDA growth above gross profit growth ambition, at what organic gross profit growth rate does OPEX stop absorbing the gain and margin expansion resume? What gating factor, salaries, growth-related spend, or reinvestment?
Yeah, so we had 7% OPEX growth in the quarter. I would say, looking at last year, we had a slightly lower OPEX level, linked also to performance cost due to sort of lower performance in that quarter. So I would say the normally lower OPEX maybe explain around 2 percentage point on the year-on-year growth, and the underlying growth is around 5%, which is linked to inflation in salary and other items. So that is the normal sort of growth rate that we are seeing. Then it, of course, depends on the gross profit growth, how this equation turns out. But we are targeting a higher adjusted EBITDA growth than GP growth, but in some quarters it can be a little bit dependent on the sort of comparable quarter.
Good. Another question from Bharath. AI agent messaging is framing as a volume tailwind. Are you seeing it in actual volumes contracts yet, or is it still forward-looking?
It is mostly forward-looking. We have some contracts that we have under implementation or just being implemented. Last quarter, I mentioned a global retailer, for example, which fits into this category. So far, the impact on the numbers are small, but we believe that this is going to impact going forward when the solutions have been implemented and scaled.
Good. A question again on RCS in the Nordics. Any qualification of the revenue gross profit opportunity specifically?
We are not ready to sort of go in and quantify this as of now. We need to see how quickly the mobile operators, the other mobile operators follow Tele2. You can look at sort of some the data points that we gave for France. Then you sort of can put that into perspective, I guess.
Thanks. Then a question from Henriette Trondsen. "Western Europe was better than expected. Can you give some color on this improvement and expectations going forward?
Western Europe was very strong this quarter compared to same quarter last year. I would expect Western Europe to still perform the coming quarters as well, maybe not to the same extent as we saw this year. Q2 was, for Western Europe's part, and partly also Q1, a little bit depressed. There were some softness on the customer numbers then, and we've seen sort of a lift up now in Q3 on top of the contracts that we have signed and implemented as well, helping the growth momentum.
Then a question from Olav Rødevand at Pareto. "Can you provide some color on the enterprise gross margin contraction year-on-year? Is this driven by lower A2P margins, or if so, why? Is it possible to quantify the positive gross margin effect from CPaaS solutions year-on-year?
Yeah, I would say that the enterprise gross margin development is very much linked to mix effects, customer mix effects. Typically, as we see, as Thomas mentioned, we see very sort of limited price reductions on A2P still. It's fairly stable. I wouldn't say that's a big part of the equation. It's mainly about customer mix from quarter- to- quarter. Sometimes large customers at lower margins, they grow more than the rest of the base, and that impacts typically the margin.
A question from Øystein Lodgaard at ABG. "SMSPortal was disappointing. How confident are you in a return to growth in 2027, and how much growth do you expect for SMSPortal in 2027?
I can answer that one. Yes, I agree. The growth momentum in SMSPortal was disappointing. This is the first year we owned SMSPortal, so there are two elements in the 2025 numbers that we didn't basically understand the reach of. Two more non-recurring events, one in Q1, Q2, with concatenated messages on some selected customers due to format error, driving up the volume quite significantly, and also a seasonality effect on the international business that was either high or didn't come through this year as expected. We have gone through the numbers in Q4, and we of course know the numbers for Q1 2026 and Q2 2026 in detail. There is nothing in the numbers as of now that is telling us that we have any other sort of negativity here.
When you look at the growth in the domestic business and also the pipeline here, we are very positive to returning to growth again in the next one or two quarters. How much growth that we're able to extract, what we've said before, without larger contracts coming through, the growth momentum should be in the mid-single digits, which is sort of what we report fairly in line with the domestic growth, the domestic business growth. We are working on some larger contracts as well, and if that come through, then the growth momentum could exceed double digits. But as I said, it's difficult for me also to forecast exactly when larger contracts are being closed.
Thank you. Organic gross profit growth accelerated to 7% in Q3, supported by improving NRR. How much of this improvement is driven by underlying volume growth, pricing, and customer mix, and what gives you confidence in sustaining high single-digit growth through 2027?
I can take that one. We basically saw a volume uptick in the third quarter compared to the previous quarters, especially also in Western Europe. We have, of course, a slight positive margin effect, mainly, which is approximately 1%, is coming mainly from global messaging, due to a better mix there. Net retention obviously better across regions, enterprise regions. Also, global messaging is improving. That is mainly a volume-driven effect. The trends that we are seeing now, as we touched upon previously, makes us confident in sustaining this growth level into next year.
Then over to SMSPortal growth and margins. How much of the group's gross profit and adjusted EBITDA margin expansion appears to be driven by SMSPortal?
Showing that in Morten's slide. The impact on gross profit is fairly limited, but on EBITDA it is larger.
Yeah.
SMSPortal continues to lag in terms of growth, while margins have contracted year-on-year. Could you elaborate on the underlying growth dynamics and the drivers behind the margin pressure?
It's mostly due to customer mix effects, so that's about it. Some customers are growing more in one quarter compared to another, there is difference in the legacy margin levels.
Hmm. Another question on SMSPortal. What was the gross profit growth in the domestic business, excluding international operations?
That was around 7% in the quarter, so high single digits, that's supported by the implementation of new contracts, of course.
Great. A follow-up. Given new annualized messaging volumes in Q2 of 450 million messages and 550 million messages in Q3, could you give more color on why this doesn't translate into better growth metrics for SMSPortal?
No, as we explained, that is impacted by the high comparables or the high seasonality on international business, which didn't replicate this year. So that is giving a headwind, which is not fully offset by the healthy growth that we see in the domestic business. We see that normalizing in the quarters ahead, and hence the underlying domestic growth gives us confidence that we will return to growth, as Thomas mentioned earlier.
Thank you. We have one last question. It's again on working capital. Could you give any color on the size of the customer and also customer concentration?
No, I don't want to go into the details of the customer. It's one of our top customers, top 10 customers, I would say. Highly liquid, but there's no risk in those outstanding receivables, so it's just a matter of payment process as a client. So there's a good dialogue, and as I said, they settled the outstanding amounts already in October.
Good. That concludes the presentation. Thank you to Thomas and Morten for the presentation, and thank you for listening in. See you next quarter.