Earnings Call: Q1 2021

Apr 28, 2021

Thank you very much, operator, and good morning, everyone. Welcome to this Q1 2021 results presentation for Cinch. My name is Thomas Heath. I'm Chief Strategy Officer and Head of Investor Relations. With me today is Oskar Perkav Viner, our CEO and Roshan Saldana, our CFO, who will take us through a presentation before we open up for questions. And with that, I leave the floor to Oskar. Thank you, Thomas, and welcome, everybody, and thanks for for your interest in Cinch. So the run through presentation and then happy to answer your questions. So please go to Slide 2, please. So we had a revenue of US1 $200,000,000 in sorry, Thomas, should I have the CEAC presentation? Why am I coming in U. S. Dollars? You should probably be in SEK. Let me run those just those numbers for you and then I'll hand the word back. Right. So past 12 months, just under SEK 10,000,000,000 in revenue, SEK 968,000,000 in adjusted EBITDA over the past 12 months and the market cap around SEK 100 per SEK1 1,000,000,000. That's the only sec I've got for you, Oscar, so you're back again. Thank you. All right. You're trying I confused me there, sorry. All right, good. Looking at those numbers, obviously, that has been the past 5 months. It is run rate wise, with all acquisitions, it would be higher. Interesting to note and think about when you look That's like a $10,000,000 a month adjusted EBITDA that they're throwing off. You have the figures in the exact figures in the statements we've given. But it's a significant piece that is coming in, which is highly profitable and highly cash generative. So it's just when you think about the business, you can think about it now, but you can also think about it when you add all actually important to understand. The 2,160 people, if you would add in telequently, would add some 600, spread, so $2,800 roundabout. That's another point that is that we are obviously considering when we're scaling the business No, that's all right. We're really coming closer to the 3,000 mark here. And what do we need to do in order for that type of company. For the 7 countries, we do customer engagement through mobile technology. So basically, today, voice video. So if you want to have a video call with your doctor, if you want to have a voice call to your doctor or to your right hitting supplier pair or if you want to get a message from your bank or something like that, then we provide those type of services. We do 52,000,000,000 engagements per year. That is we touch on average every single mobile phone on the planet a little bit over 15 times and that is pre Intelliquent. With Intelliquent, we would add 300,000,000,000 voice minutes per year in the U. S. So that is we're the largest provider then to all the 1800 numbers in the U. S, for example. From a volume perspective, it's also a significant add to the business. We serve 8 out per 10 of the largest U. S. Tech companies. So you can rank the largest tech companies, we serve 8 or 10. Within the 1st round, not in the 2nd round, we won them on the when they really look for high quality international provider who could give to provide them globally on their messaging or voice needs, that's when they came to us. And that's a very, very position to be in, and we have proven that's kind of the proof for our quality. You wouldn't get there if you don't have at absolute top notch for quality in the world. And we've been continuously growing with these accounts over the last quarters. This market has a 100 percent consumer penetration. I have not yet met one single person since I joined and I bet that you can't do the same of the adult populations in any country and which is not a user. I mean, all of your friends have used messaging voice or video services from these providers. They call the doctor and they had a voice call to Uber or they got a message from the bank or their dentist or what have you. So this is an Extremely big markets. And I think that's when you think about the growth that we are having that the leading players in this market is having and the opportunity going forward, that's what you need to think about. It's like every single consumer on the is of user at volume. And every single enterprise who wants to communicate with the consumers is a potential customer on this type of service. It is a huge market and it's sometimes mind boggling to me how many customers and types of customers, you can actually find in this type of market. We've been profitable since our foundation in 2008. We pride top of that, found around $10,000 share capital, not needed 1 single dollar for funding operations since that. And we had a obviously, as you're seeing a very strong growth in gross profit over the last years. Operator, let's go to the Next slide, please. We on Slide number 3 here, we show the gross profit development and adjusted EBITDA development. You see the organic development, and we see the the acquisitive of what we have done the last years and the last year with WAVI, SDI, ACL and now in Telekent, we can see the size of these businesses and how much is adding to our GP and adjusted EBITDA. We focus on gross profit since the pass through revenues vary between geographies. The Pass through revenue to vary between if you combine messaging and voice or if you combine messaging and SaaS, it is just different. So you would think about the business in the wrong way, both from a geo perspective and from a cross product perspective, if you think of revenue, you would just like make the wrong decisions. So it is the focus on gross profits, My situation is, when you do this type of growth, and I think all of these acquisitions, I'm super happy with all of them. I wouldn't want any of them undone. I think that really puts us in a good position. I really like the teams that we're adding to per core. But when you do this type of growth, you get into situation, you've got to scale to handle it. So I think that's what we are in. We're kind of now saying, all right, we need to up our systems. We need to up everything from our management of facilities. We have so many facilities around the planet, right? We can optimize that going forward, but we need a responsible for that or maybe we need 2 or 3. HR systems, we're growing out of our HSS. We need to change to effective systems. You have Comp and Ben. How do you handle Comp and Ben in this many people, this many companies in an efficient way? You need to up the team to be able to do it and you need to up these systems to do put? So there we're taking, as you can see, kind of scale up investments to handle a bigger scale. And That's to me 100 percent the right thing to do. And right now, it looks like an OpEx increase. Over time, I think it will drive as a gauge, but that's what you're seeing in the business right now, which to me 100% the right like to do. And I'm also convinced for you to know that over time, it will drive the cost down. Think about the facilities. If we have people patiently, but it will take some time. So that's really what you're seeing. We're also actually investing to increase growth in the acquired units. Taking SDI, and SDI had, we were at 11% EBITDA, adjusted EBITDA and SDI was at 5%. SDI didn't have any news and our growth was faster, SDI didn't have any new salespeople. They didn't have any marketing investment that scale didn't have any new salespeople. So we're obviously, I'm saying, well, we can increase growth in the SBI by base, if we apply the same model of adding a new sales team to the SDI and adding marketing investment here. So we can increase growth to our levels and we can increase profitability to our levels, but we need to do the investments now in order to do it forward. Same thing with Intelliquence. I think it's a fantastic best network voice network in the U. S, but they're only spending 10% of their OpEx in 10% of their OpEx in sales and marketing. And we're like, but you can grow faster here. But then I need to get the people in first and get the marketing investment first and then I can So it's both a scale up and to increase growth, which will over time drive better financials. But as anybody with operating run the business at the scales of operations, it's going to take 6 quarters, 4 quarters in order to get this motion going. But the good news is we're just applying the same models. We're down in sales successfully to new businesses. I'm confident of it, but it's obviously taking some time. All right. Operator, next slide please. So growth markets. We are in a really good market. This market is growing in management accounts. Our biggest segment pre Intelliquent is messaging, dollars 17,000,000,000 HPSMS growing 5 10% to 15%. Plus you got 100% growth rates in conversational investment, like WhatsApp, RCS, WeChat, kick out, talk, all of that. That's very high growth in the market. So combination of big market, steady now with hyper growth. On top of that, you've got the CPaaS. This is the software service like a chat layer. You just like on top of delivering the message, you purposes business. All right. Operator, next slide please. This is just Fundamental, very strong kind of market driving momentum. I mean, the text messaging industry has grown up because it has higher operating rates, higher rate rates than email or any other panel on the planet. If you want to reach anybody, any individual on the planet today, text is the most efficient channel. Because compare email and text, higher read rate, higher open rate. So enterprises figure that out and they're using text for it's like replacing, it's complementing. So it's adding another tool to their communication strategy. Pattern. But text has one big issue or one big limitation. It's 160 characters only. With the next generation mass in the channel, that mainly the patient is taken away. So you're going to in the WhatsApp or RCS or WeChat or KakaoTalk or all of these Apple Business Chat, those channels, you're combining the high open rate, the high read rate with an app like experience instead of 60 character message. And just like Ghost, I think very naturally, that is a much better service. It's going to improve per The performance KPIs of any customers using email or text campaigns on the planet, and that is driving a lot of the by growth in this area. That's why we're seeing the growth rates in these areas basically. So it's very natural, very fundamental, which is what we like. We focus on the value to for enterprise and value to end user. I think optical inspection, you can see it here as well. You can see the per RCS WhatsApp. I mean, just compare the text message, great service, high open rates, high read rates, but compare it to RCS or to Messenger, to Viber, where you have a picture, you have an action button which you can click, you can have a conversation with them, etcetera. It's just a different level of service, a different level of user experience. And as an enterprise, you can do a lot more things when you can have a conversation, when you can have action buttons, when you have kind of pictures and carousels and etcetera, you can just communicate in a richer form of way, which drives a for volume and a lot of need for SaaS services. So that's what's happening. There's going to be a rapid growth, but it's going to take several years before this penetrates into the market at full scale. So it's going to be a steady growth from this area over the coming years is my projection. All right. Next slide, Slide 7, Operator, please. So last quarter, we are very partner oriented. We believe that given the market is so huge, we can't sell to every single enterprise on the planet. That's not what we're going to do. They're very partner oriented. So last time last quarter, we announced a partnership with Salesforce. This one, we announced one with Adobe. So basically, we have partnered with Adobe strategically to do 1 and 2 way messaging campaigns across next generation messaging channels. Again, we're integrating a big Cinch Conversation API into the Adobe product suite. And this one, we're doing it through Adobe Experience Cloud. So basically, in the Adobe Experience Cloud, which is a new product set coming out soon, we are integrating the Cinch message nodes. So in the picture, you can see the little blue box, blue purple on the top, a proper circle on the top, which says Cinch, send a message through Cinch, which if you add that node in the flow builder of Adobe Experience Cloud, then you can click on that and then you can create the campaign or Create messages on any other channels in the same conversation API. And then you can use the Adobe software to manage, I mean, what everything, all the great it does. And Sendly can pay and you have your lists and Sendly can pay in there and Sendly can pay in there. And this is like seamlessly goes into our into us into Cinch basically. So this is a very powerful partnership with a I mean, kind of first was Salesforce, now Adobe, the other very large marketing cloud here. We're not only partnering with the Adobe Experience Cloud, it's a partnership on a broader level, but I would say a very as well as Salesforce, a very, very powerful partnership here. A bit how when we do with tech and go to market acquisitions, what we're doing after that, actually take chat layer. I acquired a company in Belgium, great technology, SaaS company. They do intent recognition, right? So When a message or voice call comes in, they would interpret what does the consumer want to tell us. So from our perspective, we would send the message out that we would charge for that. If the consumer responds, we would then tell the enterprise, well, we sent the message, we got we charge for that, do you also want us to interpret the intent of the response here so you can automate that? And if you do, you need to pay a SaaS fee. It can be like a monthly fee or a monthly active user or on a per transaction level, but it's a pure SaaS fee. That's what Chatlayer is. We acquired this company in Belgium, Great technology, but relatively small team. And then you see 1 year after the acquisitions, the number of messages on their platforms increased 32x. It's a 3 30% increase in recurring SaaS revenue. They're now in 3 data locations up from 1 because they were in Europe and then our American team says, well, you need to have your data here and our Indian team says, you have to have per data here because of local ligrations and customer proximity, etcetera. We have moved from the largest customers in Belgium to the largest customers in the U. S. And this is now on the very largest companies in the U. S. In total that we have sold chat later breaking into it. And we have an intact team adding headcount here to cope up with the growth. Their biggest customers is Wavy. So the biggest region is actually WAVI, another acquisition. ACL is selling it aggressively and the same sales team is progressively. So there's a very good view of what exactly what we'll do when we acquire a technology go to market company. We have a great piece piece of technology and we scale it globally. All right. Operator, next slide please. This is our strategy. Any of you have seen it been times before, is the connectivity, is the text messaging services, the WhatsApp services, the WeChat services or the voice services, just connecting the call or sending the message. And we've got SaaS services where chat player is a good example, just the Services on top that you can use there, which is complete SaaS services, where you would charge an additional fee in a traditional SaaS model basically, while on the lower level, it's a per message or per call or per minute type of model. Next slide please, Slide 10. Strategic acquisitions, we have done a lot. We have announced all of those. So Intelliquent being the latest, and I think we talked about this. So this is more of a reference slide where to see the strategy of technology and go to market. You saw what we did number wise with chat layer and that's obviously the intent to do all here. Wavy we are very good at conversational messaging and now we're scaling out the waiving model to all the regions in order to increase our conversational messaging growth in all the other regions. So that's another one of those. My Elephant, we've done the same. So we're kind of scaling out the vehicle and My offerings to the global teams. And on the scale and profitability where we choose a region, a large customer base, A product with a highly scalable and large company that we add to the mix. And what we think here is like, we What is logical in CPaaS? What is logical for our position? 1st, we make and make or buy. And if we think, well, this thing is better to make, then we make it. And This thing we think it's better to acquire and we find a good target, then we will try to acquire. And I think the combination of organic growth and growth and M and A driven growth is very good from both operational and financial perspective. Slide 11, Ben? It's just for your reference. I won't comment on this. We're just like giving you again the numbers of Intelliquency have it readily available, but I won't talk about it. So operator, if we go to Slide 12, please. So getting into the financials. So here, we will play, what's going on in the business. And I think what's going on is very straightforward, but it takes this quarter a little bit more to understand, plan, I think. So I think we will spend quite a bit of time of trying to articulate what we're doing and what's happening in So January to March 21, gross profit rising 84%. All right, that's a great figure. So We're very happy with that figure. Next figure that you can look at is obviously the adjusted EBITDA rising 30%. And the obvious question is why is it so large of a difference between the gross profit and adjusted EBITDA? And I think that's the main thing that obviously we're looking and being very, very diligent on understanding and making sure we make the right decisions. And that's what we want to explain I'll spend the majority of the rest of the call to explain here. So if you jump down to the organic gross profit growth, the first in order bullets here. So we've been looking at our business and organically then, how does it trade? Organic gross profit growth is 24% in local currencies. Obviously, in this quarter, you have a lot of currency effect. So I mean, the dollar is going down The SEK, obviously, the number the growth in SEK becomes lower, but our main business is in the U. S. And we obviously measure Right. So organic gross profit growth, 24% in local currency. I think that's a really good figure. We had a whopping 37 last quarter, but this is a very solid performance. So we're happy with that figure. Then when you look at adjusted EBITDA growth and exclude currency effects and share incentive plans. As our stock price has gone up so much lately, then we need to account for the incentive plans in that, obviously, for what it may be in the future. So if you take away those 2 currency and share incentive, it's 52% underlying adjusted EBITDA growth. We're going to come back to that to get more details on it. But so then if you take away currency and share incentives, the gross profit is $84,000,000 and adjusted EBITDA is for 2. All right. Still a big difference, but a much less difference. So but that's kind of the first step that you need to understand there. The second thing then you may Baskin and what I asked my team and what we really go into, but this 52% versus 84%, why is that difference? And When you look at that, it's 2 major things or 2 big buckets, which is roughly half and And the one is, SDI gives us a dilution effect. SDI is a great company, Super happy, but haven't done the deal, but they have a 5 percent they had a Sims was at 11% adjusted EBITDA and a high growth and STI was at 5% adjusted EBITDA and a lower growth. And when you mix these, you get almost like a dilution per the effect of SAGE, right? You get a lower adjusted EBITDA growth and the lower adjusted EBITDA kind of absolute Or percent, not absolute, higher absolute, but lower in percent. So that's kind of roughly half of the between 52% and 84%. And that's exactly why we're investing there to increase the growth? Because well, no surprise surprise, if you don't have any new salespeople, you're not going to grow very fast, right? And why we're porting all of their per traffic over to the Finch platform because we know then we can increase the efficiency, etcetera. So that's am I worried about that? No, because we've before increasing growth and we've done it before in efficiency, but it's going to take a while before we can reap all of those benefits. So that's half of or less than half. And the rest is what we got to is, given that we were so successful in making the acquisitions we wanted, we actually hit almost every acquisitions we wanted to do. Then we've got it in the position where The business is so large, we need to add what we call scale up OpEx, which is we don't count it as integration because we're pretty tight in integration. We're saying we're only counted as integration cost if you're allocated to a project in this specific company and we're time reporting your hour to do something specifically to integrate this company, to move traffic or implement the CRM. But we're also getting into the we just need to have bigger core functions, bigger HR, more systems in finance, etcetera. We need to scale the core functions up in order to handle the shows up in order to handle the incoming volume. So that's the other half of the difference between $52,000,000 $84,000,000 that we're doing. So gross profit $84,000,000 Adjusted EBITDA expects currency effect presented by 52, and then you can divide the difference 52 to 84 in STI dilution, if you will, and scale up. I'm not at all worried about the scale up in long term. That's we're going to drive out the efficiency Hi, there. So I'm not at all worried about getting back to levels, but we just need to do the work and that work typically takes 4 or quarter basically in order to get back there. All right. Operator, let's go to the next slide, please. Key growth drivers in this quarter is acquisition of SDI, TWW, WAVI and Acell Mobile. Obviously, you can see Number 2 is continued growth with big U. S. Big companies. We're also seeing new use basis. We're selling more than our inter product, which was text to them. So they're kind of requiring more SaaS services, more new services from in their different accounts. So that's good as well. And the third one, which we're very happy with as we've been talking about improving our broad growth in sales and marketing to the base. And In this quarter, we see a significant effect and growth driver just like our sales and marketing motion being more and driving improvements and driving a broader growth. That's the 3rd big growth drivers that we're talking about here. We've talked about a couple of quarters, we see good and good indications. And this quarter, it's kind of yes, it is a significant contributor to growth here. All right. Operator, next slide. And I will leave this to you, Rashaan. Thank you, Oscar. Presentation. I hope you can all hear me. I'm glad to present some of the financials on the some comments on the financial pages today. On Slide 14, I think as we usually show every quarter, you see a bridge explaining our underlying profit development, we focus on gross profit in our business in terms of targets and incentives and really what drives our business Because a large part of our revenues are paid to carry the underlying transaction to either telecom operators or TTP providers. And therefore, we feel gross profit is what is used to assess development. Performance. Consolidated gross profit rose by 84% during the quarter to $820,000,000 from SEK447,000,000 last year. Negative exchange rate movements, that's the Swedish kroner getting stronger, reduced growth by $27,000,000 or 6%. We've since the Q1 last year, we've closed ACL, chat layer, WayVie and SDI. And these 4 companies contributed 65% of the increase this quarter. Remember again that WAVI was closed 1st February, so it's only a 2 month effect this quarter. Organic growth and gross profit then, excluding the acquisitions and then in local currency and in comparable units was 24%. This is something we're very satisfied with. I think the underlying gross profit growth is strong. Especially looking at the messaging segment where the total growth was 85%, but the organic growth in local currency and comparable units was at 32%. And again, the scalability in the messaging segment, where you can see that the adjusted EBITDA and gross over gross profit came in at 60% per quarter? Gross profit declined by 50% in the voice and video segment, where we are seeing still muted demand due to the ongoing COVID-nineteen pandemic. And we haven't seen signs of recovery during the Q1 here. And then just looking at the small operator segment, again, this is the operator segment excluding the STI piece because that is in the acquired gross profit. So the operating segment the organic operating segment remaining more or less flat versus last year. Together with SDI, That segment grew 91% on gross profit. Operator, please move to Slide 15. And here again, It's a bit of a numerical explanation, I think, of the things that Oskar said. I can walk you through a bridge Essentially, starting from the EBITDA margin that we had a year back in Q1 2020, which was by 11.3%. This was before we started to consolidate the acquisitions that we closed after Q1. So So when comparing to the Q1 2021 FDM margin of 7.2%, we see essentially 5 items that have caused this time. You can say that the first two, I mean, 1 are pretty self explanatory. I mean, you have, of course, the currency effect. There's a currency effect in terms of declining gross profit, but it also declines OpEx. So the net of those had an EBITDA margin impact of roughly 0.5 percentage point. And then we have sort of the costs related to the share incentive programs, which is affected by the Stock price development contributing an additional roughly 0.5 percentage point. Then I think we talked about the STI business. That's a business that is margin dilutive. We of course we also said that when we brought in that business, When we announced the transaction, it had a growth rate of about 10%, and that was a bit weaker when we actually closed the transaction. We're still very optimistic and positive and looking at our organic growth rates that we can drive for the growth in this business and therefore we make investments To actually reach or to improve the growth rates. And we will also take out synergies from the consolidation of SEI, as we have said before. But both of these things take time to realize. And then we only closed the transaction on 1st November, so it's been really too short a period to see any kind of impact from growth or from synergies or Significant impact from synergies in the SDI business and therefore the margin dilution effect remains. We also spoke Probably headwind in voice and video. So that contributes an additional 0.7%. Hopefully, something that we can improve as the world recovers from the pandemic going forward. And then finally, of course, investments both in scale, but also in growth. I mean, remember that we're also investing in new products by conversational messaging, which today don't realize short term, of course, the kind kind of gross profit, but the large investments in scale as the company has more or less doubled or sorry, quadrupled in size during the last 2 years and we need to scale up a lot of functions to be able to manage the company at the site that we are today, but more importantly also prepare the company for the continued growth story and continued acquisitive journey that we have set up to do. As a comment from me on this, when you look at this, a question we ask, are these the right investments? Like is it right like is it right that this stage invest in scaling growth and take a little bit short term lower adjusted EBITDA margin? To me, the question is Yes. We have organic growth opportunities and M and A related growth opportunities that are very large. Therefore, it is right now. And the same headwind in voice and video, I think that will turn together with Intelliquent. We're going to be much, much, much stronger. And then margin dilution for SDI, Are we comfortable we can increase that? Yes. So all of this, we're kind of we believe in it. I mean, it's work. You could never know, but it's work, but we're comfortable on that. And at that stage and then are we do we think we can turn this over time? Is it right Yes. Do we think we can turn it back? Yes. We're very comfortable on seeing the OpEx per message in core Cinch versus the acquired companies. We just see that we're we have much more efficiency. And therefore, we're very comfortable per release, but right now the numbers look like this. Right, Sorsheim, sorry. Thank you. Important clarification, important confirmation, Of course. And I think yes, and in terms of time line, I think when it comes STI, I think we've indicated about 18 to 24 month time line in terms of realizing the full synergies. Operator, please move to the next slide on Page 16. Here you see the headcount growth in Q1 twenty results. With that, Oskar, I'll hand back over to you to continue. All right. Thank you, Ice. I'll Speed up a little bit here. I want to leave quite a bit of time for questions here. So if we go to Slide 17, operator, messaging, biggest segment, and you see what Roshan said. Total gross profit growth of 85%, organic growth in our core segment of 32%. That's 2 very strong numbers. Obviously, growth broadening beyond U. S. Tech and SDI and WAV contributing. Obviously, we're getting per comps, but still in a very solid growth rate in our main segments. If you go to Slide 18, you see the rising mass volumes and here you can see the huge amounts of transaction increase we had, 3 27% year on year basis, 40 and growth in comparable units, I mean, you can imagine the type of things we need to do to the organization or to handle this type of growth. We're not concerned. We're doing the right things, but we need also the scale, which will in turn turn to efficiency and adjusted EBITDA going forward, but we need to scale to handle it. All right. Slide 19, please. Gross profit per transaction. Here, you see the gross profit and the OpEx per transaction, and we're very focused on driving the OpEx down with automation, etcetera, you see the big impact that ACL is having. You see the investments we're doing now, lowering this margin a little bit in order to get it back to where we want to be going forward. But this is a key metric that we're keeping very, very close eye on. And interesting, I just got the stats from our Chief Operating Officer who's been comparing what we have here and that we have in small and non integrated units. And it's like our OpEx per message is 5x to 10x lower than a 1 country business, if you will. So that's kind of a reason for the consolidation, right? When you scale, you get much more efficiency out. And we see that in our own units for platforms we haven't integrated, which is few, but there is 1 or 2. And then you're like you see the difference here. All right. Slide 20, please, operator. So adjusted EBITDA on the messaging side per gross profit, we've been around between 40% 50%. We're at that rate right now. We're a little bit lower due for the OpEx investments and the acquisition of HDI having a dilution effect here as well. I think the levels are still very, very good, but we're kind of trending down a couple of the last months here, and we're managing this to a right level. All right. Operator, Slide 21, please. Voice and Video. Here we see good revenue growth. We've taken a couple of high revenue, low margin and customers that we think are really good to take, but this we see good revenue growth, but gross profit not following that same way. We still see COVID impact. Pact. On the other hand, we see very, very good possibilities for this business when you combine our skill sets and our products combined with Intelliquense, we're We think we're very strong going forward at a completely different level than this is. All right, operator, Slide 22, please. Operator, we're combining the operator teams in SDI and Cinch. And that kind of combines the software business with the P2P business in STI makes a ton of sense operationally. Teams are very motivated, they combine and merge, So that's super good. And here we see how the combined business looks today. And it's a stable underlying in the operator business. All right. Then I'll move to the next slide, Slide 23. Integration Generally performing as per plan. Integration costs are as per plan. What we have added is the scale up OpEx to handle the very large growth on existing M and A, but also prep us for there is a lot of opportunities going forward. And we just When you roll this way, which I need just need to take care of the teams and make shorter teams can live and breathe and have the right scale and structure. And that's why we're taking the scale up OpEx. I would love to talk a little bit more like this on this, but let's leave it to Q and A. But in general, I think they're proceeding as per plan, we're starting to move traffic over from SAP. We're starting to soon move it over from TW, but Dublin and WAVY and we will be at significant numbers by the of this year of porting traffic over basically. All right. Roshan, financials, I'll leave it back to you. Thanks, Oscar, again. Operator, if you could take us to Page 25, please. And Page 25 is Summarizing, of course, the condensed income statement, very briefly then consolidated net sales grew by 106% in the quarter to SEK 3,300,000,000. Pick. The organic growth of net sales was 38%. Adjusted EBITDA grew by 30% to SEK240 1,000,000 from SEK84 1,000,000 a year ago. Diluted adjusted EBITDA per share was SEK3.6 million for the quarter versus at SEK3.2 last year. On a running 12 month basis, adjusted EBITDA per share increased to SEK15.3. Plan? For the Messaging segment, adjusted EBITDA was at €283,000,000 versus €177,000,000 last year. And then, of course, commenting adjusted EBIT. Adjusted EBIT excludes both items affecting comparability and amortization of acquisition related intangible assets, since the latter doesn't affect cash flow. And adjusted EBIT came in at CAD 215,000,000 please. On Page 26, you find a bridge from adjusted EBITDA to cash flow before changes in working capital. To explain the effects between these items, I think on interest and taxes, we have a steady development. In quarter, we also have a strong cash conversion due to non recurring items and the valuation of balance sheet items. So we see a cash flow generation from operations of $226,000,000 94% cash conversion, which is very strong. On Page per year? 27, you see the full cash flow statement. And here, in addition to the nonrecurring items and the valuation balance sheet items, Resulting in a strong cash flow before changes in working capital, we also have a very positive change in working capital. This is aided by operational improvements in SDI. As we take over the SDI business and we look at how We can operationally tweak that and apply the cinch policies. We've made significant operational improvements. In addition, we have the consolidation of Wavy, bringing in a positive change in working capital and also then a seasonal swing in working capital since Since that can fluctuate from quarter to quarter. The cash flow from investing activities relates to the acquisition of Wavy as well as including the net investments in tangible assets and intangible assets. Turning to Page 28. Here you see the financial targets per share. Adjusted EBITDA per share grew 30% in Q1 2020 1 measured on a rolling 12 month basis. Singe had a positive cash position at the end of quarter and a net debt of just over SEK2 1,000,000,000. So net debt to EBITDA is at negative 2.1x. Page? The financial targets for the company are unchanged from what we previously stated. Please turn to Page 29. And Here you see our financial leverage, both the reported leverage as well as the pro form a leverage. I think the difference between the two being that we include the acquired entities for the last 12 months. If we were then to close Intelliquent as at the end of the quarter of 2020, we would end up with a leverage of 3.3. We believe that our underlying business performance and strong cash generation will enable a timely deleveraging to meet our financial goals. With that, I'd like to hand back over to Oscar for final comments and Q and A. Thank you. Operator, we'll go to Slide 30, last slide. Sorry for the somewhat long presentation. I think we had a little a couple of things to go through. Key priorities, Build on momentum for broadened growth across the base. I mean, we see that we see it quarter on quarter. We can just to build on that, improve sales efficiency, marketing efficiency across very, very key to us. Continued growth of U. S. Based, global tech, I mean, obviously, really good segment to be in, new customers wins in conversation messaging. So that's the kind of 3 go to market key priorities. On the M and A side, integration of recently acquired entities and that's kind of initiatives and initiatives to increase growth and margins. And the next one is preparation for future organic and acquired growth. This is the scale up. We We see that we've done a lot, great. We need to scale to that and we see there's opportunity to do it going forward and we need to make sure we have the scale and the systems and the processes to handle it. And then it's continued strength in our connectivity offering. We have really good focus on being investment on plan upon doing that and then investing increasingly on the SaaS side to gradually grow the plus revenue at good and solid rates. That's it. That was the last slide and last comment from me. And then with that, we're happy to hand it over to Thomas and open up for any Q and A here. Thank you, Thank you, Russian. Operator, may we have the first question, please? Thank you. The first question comes from the line of Donald Iveribay from Handelsbanken. Please go ahead. Your line is open. Thank you very much for taking my question. On the Zubair here. I would start off with the EBITDA margin headwind that you touched upon in length on Slide 15. I was wondering if you can touch a little bit more on the STI and investment in scaling growth, how we should think of more near term Q2, Q3, will the percentage effect flatten, increase or reduce just the coming quarters just to understand where we are in the process? And the second question, if I may, would be on Weywe, and that would be on how you can give us the underlying growth in Q1 in local currency, I. E. Pro form a week with also January, it seems quite high to me. Plan. Okay. Thanks. Thank you, Daniel. We'll pass those first question on to Roshan. And I don't think we give the numbers for the second questions, but perhaps little bit of commentary. Rocham? Yes. Thanks, Thomas. I think, Daniel, I think the first thing To think about is that we are the margin dilution is something that is underlying the STI per TI business, there's just 2 ways that we will really address that, right? One way is by growing the STI business and the second way is by realizing synergies. And I think you're well familiar with sort of the long sales cycles and the long implementation times that we have typically in our business and therefore to see material impact in growth is still a few quarters result. And the same applies as well for synergies that while we're taking out some of course the early synergies, the large synergies lie in the combination of platforms. And that is again something that we've started with. We're very happy with where we are. We've completed planning and we're doing some pilot migrations. But No, this is a continued journey over the next 18 months or so, where we will combine platforms and therefore be able to towards the end of that period. The second on the investment in headwinds scaling growth, I think it's fair to say that Obviously, these investments have come in both during last quarters as well as during Q1. The people coming in during Q1 and the coming in during Q1 is not fully reflected in Q1, and I don't think we're done with that either. I think we'll need to make further investments in the coming quarter as well to prepare for the company both for the increased scale and for continued growth as well as to continue on the acquisition journey that we want to make. So I think that's how I would like to sort of outline that and how Think about that. On wavy, again, I don't think we're not able to give you the numbers right now. Maybe we can take that offline. I think in general, I mean the Wavy business is performing well. We're happy with with the overall SMS development as well as the new business development. I don't know, Oskar, if you want to add something Yes. No, we're happy with the only worry sign, which is for our businesses, the operators are increasing prices at the I think it's 27%, one of the biggest operators that always kind of rocks the market a little bit. So that's the external negative. We're going to manage through that. We've done it many times before. But yes, It takes a little bit of it yes, it's a little bit kind of rocky for a little while, but nothing major that I would be worried about. Okay. And that is invert I guess? Sorry, say it again? Yes, it's in Brazil, the operator rate was 27%. Yes, one of The major operations in Brazil and increasing prices, exactly. Yes. Okay. Thank you so much and good luck in Q2. Thank you. Next question, please. Thank you. The next question comes from the line of Projdravianovic from Carnegie. Please go ahead. Your line is open. Thank you very much, operator. Thank you for taking my questions. So a little bit on the growth side. The Last year's big revenue driver. That was U. S. Big Tech, right? And in this presentation and in the reports, you mentioned more broad based growth across Also different customer segment, also different geographies in addition to these. And it will be interesting to have some more flavor of New customer types that are opting in. And also if we think ahead, if you would categorize the growth drivers and thinking then on an organic basis, Which ones do you think are the biggest drivers the next 12 months? Is it still big tech? Or do you see categories overtaking this role? Thank you. So I can take that question. So I mean our goal is obviously to have multiple Cylinders firing at the same time. That's my if you ask me what I want, that's what I want. Now that's not always happening, But so we're doing the organic growth on the broader base and we see good trends. We think that will continue. And on Big Tech, per se? I mean, we have no reason to believe. We think that's a strong segment going forward. But obviously, it's always like we had a couple of really strong quarters, then comps tougher and we got a plan for a relative lower growth for 1. But I think it's Generally, we see good growth opportunities on both of these segments. But while the big tech can be more lumpy, as you can understand, because it's fewer customers. The other one is more stable. In terms of and we're now happy to see kind of broadening of plot. The other question, segments, it's very wide. I mean, it is Primarily the big banking and finance is big in this, travel and transportation is big, e commerce is big, Retail is pretty big. So it's all the large Hospitals and Healthcare is big. So it's a very broad set of customers that is coming in. And it's but it's Coming from those major segments, major communication segments in the world basically. Was there another so yes, so we see a broad growth and it's broad among the segments, but it's obviously from the other large segments that we're already launching is they are the biggest contributors. Interestingly enough, you can get companies Like an Amex signing up online or like a Porsche or Coke signing up online to new services. And it just shows the power of the business and How much opportunity there are in many, many different areas basically. So that's another interesting aspect of this industry. Did that answer your question or did I miss an angle there? No, that's very clear. Perfect. Thank you very Thank you. The next question comes from the line of Ramiel Coria from SEB. Please go ahead. Your line is open. Thank you, operator. Hi, guys. Thank you for taking the questions. Just Continuing perhaps on Daniel's, going back to the EBITDA bridge or margin bridge here and Touching upon perhaps the 3rd component here, which isn't transitory, the headwind in voice and video. And you're mentioning that You've taken some customers with lower margins. Could you shed some light as to why would you do that? Is it illustrative or Anything more broad based we could speak of? Are you investing in price to get these customers? Is the competitive environment With them, etcetera, etcetera? No. I don't see any big in if we first talk about our business, right, and then we can talk about the combination with the TeleQuint because it changes the picture is quite dramatically here. But if you talk about the existing situation, no, we don't see a big price drop or increase. I mean, there's always price pressure, of course, but that's not it. It was it was more like this customer is really good for a set of specific reason. We take it now. We think we can increase margin going forward with upselling on other stuff, etcetera. So that's kind of what you see. Then you also see, we think, absolute GP from this customer is going to be good even though the margin is a little bit low. And again, we think is this absolute GP be good? And is it a profitable customer? That's the other aspect to that. And in this case, we think that the absolute GP from this type of customers is going to be good going forward. So I think it's more down to kind of continued headwind in that history during COVID, during this time, and we still haven't really gotten out of it. You should also think about that the comparison in Q1 was a really good quarter and that was pre Q COVID in this case. So it's like we're comparing to the highest point to a kind of post COVID hasn't fully recovered the situation. So that's on the first part on our area. And then but when you combine Our capabilities with Intelliquent, I think we're going to be a very, very strong voice player over time because we have a little bit more of the upstate capabilities. We complement it with more of the CPaaS capability and SaaS capabilities. We're building out the self serve a developer go to market offering and then you combine it with Intellicant's strongest network in the U. S, I think I'm very on that business on a macro level going forward. Now that takes some time, but I think we're going to be a very strong voice player going forward at a completely different scale than we've been playing at today. Roshan, do you want Just yes, sorry. Thanks, Thomas. I think just on the first part of your question, Ramiel, I think I just want to accentuate what Oscar said. It's primarily a mix effect. I would say that going back last year, the main I think we talked about we have 2 main products that we offer in the voice segment. It's the number masking product and then the verification product and the we've seen revenues drop really in both of these. And at the same time, essentially, we're bringing in new customers. Some of the new customers we brought in, we're offering products with not as much value add over the core voice connectivity. Now in a growing business, in a larger business, like if you had If we continue to trend without the pandemic, this would not be as visible as it is today. So it's more visible since we've lost probably higher since we've lost the higher margin revenues that we've had previously. So it's a mix effect. That's very clear. A final one from my side, again, on the OpEx side. I mean, to me, it doesn't seem like and of course, there's a lot of Parts here, so could be completely wrong. But to me, it doesn't seem like it's a massive step up in OpEx if you compares sort of Q1 2021 over Q1 2020 and then squared that to Q4 2020 over Q4 2019. So the scale up investments, first off, how big of a delta is there really underlying from the last quarter To this quarter? And then secondly, why are we talking about them more today than we did yesterday, if you I know what I mean. Rosh, if you take the first and then I'll take the second. I think think when you look at sort of the delta, I guess the key delta is, of course, what you looked at on the margin bridge, I think which is adding about 1.5 percentage points. And I think if you convert that to absolute figures, I'll I have to come back on that specific item. But there is I mean, we've been talking about Sort of the increase, we've been talking about the increase in headcount resources all of last year. So in that That sense, you're right, Ramiel, that this is not for us, it's not a change in strategy. What does happen, of course, that you have a bit of Different things affecting us together. The margin dilution and FTI, of course, is something that comes in this quarter. Per year. Remember that was there 2 quarters also last year, but it's a bit hidden by the fact that Q4 usually tends to be a blowout quarter for Cinch? I think I'll have to come back on the specific number question, but we can do that offline, Raman. I can hand over to Oscar for the 2nd quarter. Yes. Why we're talking about them more now? I think it's We've been successful in so many deals and we see there is a continued possibility to to great deals in the future as well. And so if we would only have done SDI, I don't need to scale up. When we do SDI, ACL, WAVI and then Intelliquant and see that there is more opportunities, then my question becomes, well, Each one take an example. Each one of the direct reports to my CTO needs to handle 250 people, and our engineering team was 250, 18 months ago. So it's like when you're so successful in the M and A track, you suddenly need to kind of scale the entire organization to be able to handle something which is much, much bigger. And that's Well, we knew that it could have happened if we were so successful. But then when you are so successful, you need to do it as well, right? But you don't really do that before you actually page? You're on the journey. And that's why we're talking about it more now because it's you kind of grow out of your old costume and you need to put The new costume, if you will. Does that eclipse, Dana? Or Yes, it does. It does. Thank you so Okay. Thank you. The final question comes from Stephane Gauffin from BNP. Please go ahead. Your line is open. Yes. Hello. A couple of questions. First of all, both STI and ACL reported lower gross margins in Q1 versus Q4. Is this a seasonal issue or a temporary issue? And what should we expect going going forward. Then in terms of the pandemic impact, it's very clear, the voice and video business, where you will likely see some tailwind once the pandemic page out. But how do you foresee the messaging segment being factor when the societies open up, you clearly have really good volumes continuing into Q1? Thank you. Roshan, do you take the first? Yes, sorry, it just took a second to get me off mute here. Yes, I can take the first one. I think Stefan, Thanks for the question. I think we tend to focus on absolute gross profit when we assess to our business, that's because our gross margin is affected a lot by in a sense where our customers choose to terminate their traffic. And since We're a global deliverer of traffic. We delivered around $40,000,000 transactions During Q1, I mean, that can be affected a lot due to swings of the traffic termination So I think that's really the key explanation for the margin differences that you see in the messaging segment during Q1. I think on overall basis, of course, you also have the mix impact when you look at the operator segment that we bring in, we bring in STI P2P, which is really into working hubs, different from the traditional operator software business that we have had, which had software like margins of close to 90%. And on voice and video, of course, margins decline in line with the pandemic effects and related commentary previously today. Oskar, back to you. Yes. On the pandemic, we have said that we see We have seen we don't we have seen like pluses and minuses. I mean minuses in retail, but pluses in e commerce. So minuses in travel and transport, but pluses in order to online collaboration tools type of thing. So we don't think that the pandemic has had a of major negative or positive effect on us today. We think it's been a little bit going to plus and minus. We don't see that we have large pandemic driven volumes, we don't think we're on a hike because of the pandemic in any way. So we think Some will go down, yes. Cloud collaborations will go down a little bit, but it's probably going to be on a much higher level than it's before, I think you can go back to your own behavior. I think e commerce will go down maybe because when retail open up. But on the other hand, I think we've driven a digital transformation in the world that is going to stay at some level. And then on the other hand, when retail goes up, that helps us. So I think we're relatively balanced. We don't think we have a lot of pandemic driven volumes. And We kind of we think that it's relatively awash. If anything, probably a little bit on the positive side when the pandemic But it's not something I, from a financial perspective, would count on in your world. Okay. Perhaps I can sneak in a final question. You mentioned that the investments are bound to be ready for future M and A. Is that just a broad comment? Or do you see M and A opportunities as we speak? If you ask me what companies, then I obviously cannot answer, but We see continued interest and continued ability to do M and A. And yes, We always have discussions with a set of companies and we say no to a lot. And you never know if you're going to make because somebody else may make them, so you don't know. But yes, we see on a broad level, a lot of interesting opportunities that I think would strengthen Cinch as a customer, if you think broader CPaaS base. So yes, we do see concrete and long term, but it's more a broad opportunity base of good possible transactions that would strengthen Cinch, yes. And it's, yes, broad and concrete. And then we're only going to make a few, but Yes, that's what we said. Perfect. Thank you. Thank you. We do have one further question from Mike Fartimore. Presentation. Thanks. Yes, Mike Latimore here. Thanks. On conversational messaging or two way messaging, roughly what percent of your volumes are in that category for the versus the kind of Yes, we haven't given those figures. We can't give them. But I think as you can see, the growth rates we're seeing is much, much higher in the segments. In the larger regions, so we don't give it, but we see Higher growth rates there, and we're seeing that's going to increase in general faster than the Messaging business. Then it's obviously dependent on How much do we we're super successful in the core messaging part as well. And how much does that grow? Do we make an acquisition there? And then obviously, the percentage figures shifts. So it's a little bit hard to talk about percent of figures. But I think the market is in the more advanced countries, maybe at the 10% level right now in most advanced countries like Brazil. And we see that we're also going to trading with the markets. In the bigger countries, it is or in the less advanced like Europe and U. S, it is much, much lower than that from a market volume Interesting. And then just with regard to some of the recent new lockdowns that have occurred in Europe Now in India, does that have a negative or positive influence on your messaging volumes? Do you end up with more e commerce and less other areas? I'm just kind of curious about these recent lockdowns, do they influence volumes? So first, they influence people, right? And we care about our People in both India and where we have around about 700 people now and Latin America and Brazil a lot. So we need to take care of the people first and make sure They are safe and sound, and that's a tough situation. I just need to be clear on that. On the volume side, we But like I said, we haven't we've gone through the pandemic and we see the ups and downs. And yes, you have some negatives and you have some positives. It's never good when a company is in complete lockdown, of course. But yes, we have seen in the positive increases on e commerce or from hospitals or from various different segments, then we have seen positive increases. In general, our volume has been a little bit table. You can probably say yes, it's relatively stable. That's the general view. And then you will see, all right, this happen in this country. But in general, it has been stable across the pandemic on a global level. Thank you. We have no further questions, so I will pass back for any closing comments. Thank you. With that, that ends our call. I'll give a moment for Oskar to wrap things Thank you. Sorry for the long call. Thank you for a lot of the questions. In general, my by Sands? Business is doing well. I mean, organic business is doing well. We're doing well on the M and A side. I mean, I'm very happy the growth rates organic and M and A driven. So that's kind of the first one. 2nd one, yes, we have an EBITDA impact now, part of that is currency and share based incentive when the stock price goes up. Then you have the others like margin dilution SDI, some headwinds for us in video and investments and sales growth, I'm 100% confident the investment and scale growth are the right things. I'm 100% confident that they will or 100% it can never be, but High confidence that they will turn out well going forward in efficiency gains. I believe we're going to increase the SDI, and I believe we're going and the headwind in voice and video, both pandemic and the and the Intelliquent. So I'm good with that. Are we worried that for margins, profit margins, adjusted EBITDA in the long run will be lower than we've been trading before? No. We think we're doing the right thing for the business. At this type of scale, you just need to invest. And if anything, if I can use a little bit of the adjusted EBITDA to scale for this growth and future growth, I think it's the right decision. So we're confident, but we obviously need to keep a very close eye on this. I mean, it's never easy when you do this. I mean, it could be close to it and make sure we don't take any wrong turns and rest assured that that's we're doing because you can't just have OpEx scaling uncontrolled in a way that you're not doing. And then we need to keep a close eye on pattern, and that's me and Russia and Thomas and the rest of the management that will really keep a close eye on that. But organically, doing well, and then these investments, I think, are the right thing. I think that's the and then the marketing generally is very, very good, both from the organic and the M and A side. So we see good opportunities going forward. That said, I think that's all we have to say. So thanks a lot for your interest and listening and and hope to meet you again in the future.