Thank you all for standing by. Welcome to today's interim report, January to June 2020. I would now like to hand the call over to our speaker, Chief Strategy Officer and Head of Investor Relations, Mr. Thomas Heath. Thank you.
Thank you, operator. Welcome everyone. Good to have you dial in to this conference call discussing the second quarter 2020 results of Sinch AB. My name is Thomas Heath. I'm Chief Strategy Officer and the Head of Investor Relations. With me on the call today, though not, of course, in the same room, is our CEO, Oscar Werner, and our CFO, Roshan Saldanha. With those introductory remarks, I'll hand the word over to Oscar.
Thank you, Thomas. Welcome again to this quarter report. We'll try to give you the information on the quarter and also answer any questions that you may have. Can I go to slide two, please? This slide we showed many times before. We're now up to SEK 6 billion revenue in the past 12 months, and an adjusted EBITDA of SEK 708 million in the past 12 months. With the acquisitions that are closed, but not counting the ones that are not closed, 822 people and present in 37 countries. What we do is customer engagement through mobile technology, primarily in messaging, voice, and video, where messaging is the largest. We do some 40 billion engagements per year. We're serving eight out of 10 of the largest U.S. tech companies, so a large portion of the West Coast large tech giants are our customers.
We believe this is a very interesting market. We believe it's a growing and global multi-billion dollar market. We believe this market will continue to grow for the foreseeable future, and therefore, we're trying to position ourselves as one of the leaders in this space. We have been profitable since foundation in 2008, so we're very proud of that, and we work very hard to obviously keep up profitability, even during tough times. We have had a solid growth since our IPO in 2015. Can I move to slide three, please? We have, as you see, had a track record of profitable growth, and we focus both on organic and M&A-driven growth. In this quarter, we had a 43% in gross profit in Q2 2020, and a 55% growth in EBITDA, in adjusted EBITDA.
We focus on gross profit since the revenue has a lot of pass-through fees, and they vary between countries. Looking at revenues in this type of business will skew your analysis. Therefore, we only look at gross profit, both external and internal. This quarter, we obviously need to say that the acquisitions of Wavy, SDI, and ACL Mobile will add significantly to our scale and profitability. You can see the impact both on the gross profit level in the yellow bar and on the adjusted EBITDA level on the purple bar, on the trailing 12 months basis on the graph. As you can see, with these acquisitions, assuming closing, we're taking a major step up both in profitability and gross profit, and we think it also puts us in a very strong strategic position. Operator, if you go to slide four, please.
To put this in context, both the organic growth and the M&A side, we're only showing messaging and CPaaS here. We're not showing the figures for voice and video in order to make it a little bit shorter. The messaging market is, on the A2P SMS side, the biggest part market and the market where the majority of the revenue is. It's a $17 billion market globally. Other estimates vary between 15 and 60. The business usage of SMS is continuing to grow. Then you also have very high growth rates in next-generation messages, like next-generation messaging channel, like WhatsApp and RCS and Viber, KakaoTalk, where you're seeing above 100% growth rates in the market.
This is a market which is combining the size and the profitability of the existing text messaging market and the high growth and system of the next-generation channels like WhatsApp and RCS, which we think is very interesting. The other thing that is happening in the market is on the CPaaS side, basically adding software on top of actually delivering the message or terminating the voice call. You deliver various forms of software services, which may be an AI service, an NLP service, which the Chatlayer acquisition is an example of, or it may be other forms of software that you add on top. There you charge more in a SaaS model where you charge, for those services, a 90% margin, because it's a full cloud service.
Those markets are growing fast as well, ranging between 30% and 50%, depending on the various estimates that you may choose. Slide number five, please, operator. As a consequence of this, we have a playbook for profitable growth where we both focus on the connectivity side, that is terminating the voice call, making the video call, or actually making sure the message delivered, or the Software as a Service on top, which are the value-added services on top. We focus on both of those. The majority of our business is on the connectivity side. Even though we grow the Software as a Service side both organically and by M&A. Let's go to slide six, please. As you know, we have been making quite a few acquisitions lately, and in this quarter, we have added three relatively sizable ones.
Wavy in Brazil, SAP, headquartered in the U.S., but large operations in Europe as well and also present in Asia. ACL, the second largest player in India. We feel that this quarter we're really taking a stance of becoming the global player in this industry. We're now a leader in both Europe, U.S., Latin America, and India for real, and being one of the biggest messaging providers in all of these regions. We believe no other messaging player is that deeply entrenched in all these markets. We think we have a very strong position there, and we think that sets us up very well for the future. Operator, if you go to the next slide, please, slide seven. This is a case for the acquisitions to show you what happens when we do acquisitions on the technology and go-to-market side.
We have the strategy on scale and profitability, but also technology and go-to-market. On technology and go-to-market, we buy typically smaller companies that have a specific technology or go-to-market ability that we think we can scale globally. One of those that we acquired a couple of quarters ago was myElefant. myElefant has a way to deliver what we call Rich SMS. It's basically some SMS with a landing page to a mobile landing page, and they have a software so that people in marketing departments can actually create those messages themselves without any help from a developer. Sinch had a customer called Nationwide, that's a financial institution or bank, you may say, in the U.K. We took the myElefant service and pitched to Nationwide, and they had a best use case.
Nationwide wanted to do payment holidays for credits, so basically prolonging payment terms for credits to their consumers. They wanted to find an efficient way of when that payment holiday or extended credit was ending, the term for that was ending, sending a notification and reminding people to start paying. They're doing this via regular mail, they're doing it via email, and they were doing it via text message. They saw, all right, well, this service from myElefant or now Sinch, seems like a really good way of increasing the engagement rates of our consumers so that more people actually start paying or take action when the payment holiday ends. They did a run here, and they saw a 4x click-through rate compared with the bank and financial sector average.
The click-through rates on this particular message or this particular campaign was 4X what they have seen before on any other campaign. It was 98% engagement rate, and that means when anybody clicks on the link, 98% of the people actually clicked on the next button in this message. You can see the first button here is if you can start making a payment again. 91% of the people that click through to the message actually clicked on it. Nationwide believe this is extremely successful campaigns, and they believe they really increased engagement rate, and they increased the number of people who took action, and therefore, it makes it easier for them to start getting payments again or putting the people on a new payment plan, basically. Very successful campaign.
To the left here, you see how the message actually look when you get to the link and landing page. You can see how interactive this becomes compared to a normal text message, with full graphics, action buttons, and things like that. This is very much representing the move you see in this industry, of moving from simple text messages to an interactive message, where enterprises have a much higher value, but they also require more software. That means that we can charge a higher fee per transaction than we could if we just send a normal text message. That's one example of what we're doing here with the new acquisitions. If we then, operator, move to slide eight. Just a short reconnect on SAP Digital Interconnect, that was executed during the quarter.
The deal rationale here is we're getting close to 1,500 enterprise customers, and some of the world's most valuable brands, and it diversifies our customer base. It's a highly accretive deal, as you have seen, so it fits our scale and profitability category. It significantly strengthens our U.S. presence. We go from some 100 people in the U.S. to 200 people in the U.S. We also get strengthening in Asia Pacific and Europe. It gives us very strong operator relationships and a status as a trusted vendor to hundreds of carriers around the globe. Given that SAP also have a P2P and an operator business, basically. We think this deal is very good. We're now in integration planning. We're going through and hoping for closing in Q4.
Targeting closing in Q4. We're going through integration planning. We're very satisfied with what we have seen so far. It's on track. We're working hard in order to get to closing here. Operator, slide nine, please. ACL Mobile, a little bit of recap. ACL Mobile is the leading cloud communication providers in India and Southeast Asia. I think they're number two in India by volume on messaging. They've got a very strong customer base with a leading position in banking and finance. A large portion of the private banks in India are now customers of ACL, and soon to be Sinch. They got very significant scales with 47 billion business messages handled in the past 12 months.
If you can compare that to Sinch's 40 billion, you can see that the volumes in these type of markets are huge. You can also see by looking at the revenue numbers, the revenue or gross profit per transaction is obviously much lower. Entering into these type of markets with a very large mobile-first population, where the number of transactions is very high, is obviously very interesting for any company that wants to be a leader in messaging globally, and that is our goal. Therefore, we believe India is a very strategic market to be in. They have 288 employees in India, UAE, and Malaysia. This gives us significant scales in the world's second largest mobile market, and more than 500 large enterprise customers. It's also a highly accretive deal, fits the scale investibility.
We get direct operator connections in India, and a competitive cost structure for further expansion into Asia. The direct operator connection in India are important, obviously, to both our Asian and to our U.S. big tech customers, who all have large volumes into India. That really, truly adds to our delivery network in those regions. Operator, next slide, please. Slide 10. India, just a little bit, you know this, but the second largest mobile market in the world, going to one or two billion mobile subscribers and a 50% smartphone penetration. It's interesting that we see a lot of innovation coming out of India now. We have the world's highest data usage per smartphone at 9.8 GB per month. It's also very rapidly digitizing economy, second only to Indonesia, if you look at various reports.
It's also the world's largest WhatsApp market, which is interesting when the new services comes. From a consumer perspective, it has 400 million users in July 2019 for WhatsApp. It's a very active WhatsApp market also in terms of business messaging. All right, slide 11, please, operator. With that intro, if we look at Q2 2020, we saw gross profit rising 43% to SEK 460.3 million, compared to SEK 321 the year prior. We saw adjusted EBITDA rise to 55%, to SEK 176.5 million, compared to SEK 114.2 the year prior. Adjusted EBIT, if we exclude acquisition-related amortization, which is non-cash-flow-impacting, was SEK 161.7 million. As you can see, the profit after tax being SEK 37.7 million, and the large portion there is obviously the acquisition-related amortization.
We also were happy to see that our strong cash flow, EBITDA to cash flow, that strong ratio is continuing, and that's what obviously you can see on the adjusted EBIT, excluding acquisition-related amortization. Organic gross profit grow 24% in local currency, excluding the currency effect. COVID-19 was causing reduced voice traffic and lengthened sales cycles. You also see that the high scalability in the business, you can truly see this when you see the message volumes going up. You can also note that EBITDA grows faster than gross profit, despite increased OpEx to handle the greater business volumes. That's a little bit of the headlines, and now we'll go into a little bit more of the details. Operator, slide 12, please.
The key growth drivers in this quarter, Sinch sees volume growth and new use cases with large U.S. tech companies, as we have seen many quarters before. We saw the acquisitions of TWW, myElefant and Chatlayer, contributing well to growth. We have a very strong performance in general in Brazil, and it's the third gross performer here. We're growing both with new and existing customers. Slide 13, please, operator. We're investing in four areas. We're investing in organic growth. We have this two-pronged agenda of doing M&A and organic at the same time. We're continuously focusing on driving the organic growth and driving that upwards. I'm happy to see that we've had a good organic growth the last quarters and also this quarter. We're seeing a continued investment in platform scalability. We're seeing supporting growth with existing customers.
Just the sheer volume growth obviously takes some investment in order to keep up with. We see a greater focus on lead gen and new sales, and continued increased focus on that each quarter by quarter. Operational efficiency is a big area, so investing in COGS efficiency and internal automation. We see a lot of the initiatives that we kicked off 12, 18 months ago are now coming up in automation. Very happy to see that that's coming out now in Q2, Q3, Q4 this year. Also seeing a client self-service tools. New technology, a large area as well. Software on advanced interactive messaging, new channels like WhatsApp and RCS. We're focusing now on a cross-channel Conversation API, so our customers can have one API and then reach every channel in the market. We're investing in RCS as service and SMSF for mobile operators.
This is the partnership we announced with Ericsson. Integration is a large focus area, of course, so both on TWW, myElefant, the Chatlayer, where they're close and we're focusing on actually doing the integration. You have ACL expected to close in Q4, SDI pending regulatory approval, and Wavy pending regulatory approval. There we do integration planning, but obviously not integration or execution. That's a big area, and will be a growing area, of course, going forward. We're right now working hard to set ourselves up to do this integration in a good way. Operator, slide 14, please. The messaging performance in this quarter is very good. U.S. tech companies continue to fuel our growth here, which we also see generally in the market, the rising volumes as businesses shift from email to mobile messaging.
myElefant and the TWW are included since mid-October 2019 and Chatlayer since April 2020. We see investments in software for next-generation messaging. In general, if you look a little bit closer to numbers, the growth in gross profit and EBITDA in this quarter in messaging alone is very strong, showing the strong performance in our core market and core product. Operator, slide 15, please. You see rising message volumes. As you see on the graph, we had a spike in early 2020, and we said in, I think it was March 2020, and we also noted there, we thought that was COVID related early, and that was going to go down. We saw that spike going down as reported at the end of the Q1 report.
We saw that happening, but now we're seeing also message volume picking up again in the tail end of Q2, which we think is good and strong. We see 58% growth in transactions and 32% growth in gross profit in the messaging segment. Operator, slide 16, please. Gross profit per transaction. OpEx per transaction, gross profit per transaction, this is a graph we're monitoring closely. Obviously, you want to see this a little bit like a crocodile gap or crocodile mouth. In the end, we want to see them increasing. Over the last quarter, we've seen that. This quarter, we see that graph being on a solid level or even increasing a little bit. This is obviously how we try to manage our OpEx to our gross profit.
As you know, we're trying to always keep our OPEX in line or at a slower growth with the GP. We see that we've been able to do that this quarter. You can also see here the reduced OPEX per transactions due to economies of scale. All right, operator, slide 17, please. This is the other graph we're monitoring growth closely. It's in our core business, the messaging EBITDA per gross profit. As you can see here, we're dropping close to 50% of our gross profit down to EBITDA. I think this is a truly testament for the scalability of this type of business. Being able to, in a cloud business, drop 50% of the gross profit down to EBITDA is a strong testament to our scalability and efficiency of running this operation. Slide 18 please, operator.
Coming out to the headwind areas in this quarter, as reported in Q2, we saw strong headwinds in voice and video. Voice and video are two segments. Part is verification, which is trading fairly well, and then it's the actual ride-hailing segment, which obviously during lockdowns and COVID, has a strong headwind. We saw that in Q1, but then the COVID effect was only one quarter, and now in Q2, we see a full quarter's effect of the COVID impact. You can see the gross profit levels and the revenue levels and the EBITDA levels on the voice and video segments to drop. Obviously, this is not what we want to see. This is, as you know, a smaller portion of our business. This is the area which is most strongly affected.
We expect this to turn back up as the COVID effect releases and as we are able to sign the new customers. We should though say that we have a positive underlying trend in the number verification business. This is, as I said, two parts, and number verification doing well, while the ride-hailing segment's obviously much more negatively affected. Here we are increasing OpEx to ensure quality and service and adding functionality, and we're continuing on a solid level here in order to make sure we have the quality as core volumes come back. Operator, slide 19, please. We also have headwind in the operator segment. We see lengthened sales cycles with lower operating investments due to COVID-19. We also have currency headwinds, and we also signed a very attractive 5G SMSF deal with Ericsson. This is to enable IoT.
It will wake up IoT devices in the 5G networks, the best way to do that is via text message. Therefore, we have developed the software and together with Ericsson, we're taking it to market to the largest carriers in the world. Here we see a great future potential, therefore, we're taking more investments here than normal because we think this case is interesting as such. We're obviously not happy at all with the negative EBITDA impact in operator, we're working hard in order to turn that trend. That said, I'll leave the word to our CFO, Roshan Saldanha. Operator, if you go to the next slide, please. Roshan, if you could please continue.
Thank you, Oscar. Good afternoon to all of you, taking time on this summer day, and some of you even from your holidays to join us on this call. Happy to present some comments on the financials for Sinch this quarter, where we continue to help enterprises digitalize their communication. Operator, please turn to slide 21 for the condensed income statement. Consolidated net sales grew by 38% in the quarter to SEK 1.6 billion. The growth rate in the quarter was positively affected by the previous acquisitions of TWW, Chatlayer, and myElefant, as well as the depreciation of the Swedish krona primarily against the euro, pound, and dollar. The organic growth of net sales in local currency was 27%. We see a strong continued development of adjusted EBITDA per share, which was SEK 2.9 for the quarter versus SEK 2.1 for the same period last year.
On a rolling 12-month basis, adjusted EBITDA per share increased to SEK 12.6. For the messaging segment, especially, adjusted EBITDA was a record high at SEK 214 million for the quarter versus SEK 112 million last year and SEK 177 million in Q1 of 2020. Adjusted EBITDA in the other segment was also decreased or affected negatively by SEK 12 million due to increase in provisions for social insurance costs related to the company's outstanding long-term incentive programs. In addition to that, the adjusted EBITDA, we also have a negative Forex effect of SEK 11 million, which varies, of course, from quarter-to-quarter, depending on foreign currency movements. Moving to EBITDA, which came in at SEK 146 million this quarter. It is reduced by non-recurring items of SEK 31 million compared to adjusted EBITDA, of which SEK 26 million are acquisition costs related to the recently announced acquisitions, mainly SDI and ACL Mobile.
EBIT came in at SEK 88 million versus SEK 73 million in the same period previous year. Acquisition-related amortization, which does not affect cash flow, was SEK 43 million. The amortization relates mainly to planned amortization of acquired brand, customer, and operator relationships as well as software. Adjusted EBIT excludes both items affecting comparability and amortization and of acquisition-related intangible assets. These do not affect cash flow, hence we consider adjusted EBIT to be a better measure, and it amounted to SEK 162 million this quarter versus SEK 104 million same period last year. Operator, moving to slide 22. Slide 22 shows a bridge explaining our underlying gross profit development. A significant part of our revenues are passed on as cost of goods sold to mobile operators. We pay them to send messages and place calls, but the rates they charge vary greatly between markets.
Since pass-through revenues do not contribute to our profits, we focus almost exclusively on gross profit when we assess and steer our business. Changes in our gross margin often reflect changes in geographical mix rather than underlying performance or competitiveness, and over time, we aim to improve gross margin through also delivering additional value-added components to customers. The bridge explains the different components in our gross profit growth and organic growth. Consolidated gross profit rose by 43% during the quarter to SEK 460 million versus SEK 321 million last year, same quarter. Positive exchange movements contributed or explained SEK 4 million or roughly 1% of this increase. The acquired companies, which are then TWW, Chatlayer, and myElefant, contribute 19% of this increase. Organic growth in gross profit in local currency and comparable units was at 24% for the quarter.
When looking at the segments, gross profit growth in the messaging segment was particularly strong, coming in at 59%, of which organic growth in local currency was 35%. Acquisitions contributed 23% points and currency fluctuations an additional 1% point. Adjusted EBITDA over gross profit in the messaging segment also came in at a record 52% for the quarter as we benefit from increased scaling. Gross profit declined by 40% in a voice and video segment, I think Oscar has talked about sort of the reasons behind that, as well as 13% in the operator segment, which are both affected by muted demand due to the ongoing pandemic and the related economic development. Operator, please turn to slide 23. On page 23, you see a summary of the number of resources at Sinch.
We continue to invest for continued growth, and Oscar already talked about the main areas of resource addition, which are driving internal operational efficiency and quality, increasing our sales and marketing efforts, investment in new technology, and finally, of course, integrating the acquired business. I would just briefly touch upon the size of the investment and what we believe will deliver growth during the coming periods. Our headcount is distributed in many different locations across the globe, but the main locations for us are Sweden, the U.S., and Poland, and U.K. being other significant locations. We have grown headcount in the company with 47% during the previous 12 months. Note that these numbers are quarterly averages, and at the end of Q2, we ended at 822 FTEs in the company.
A lot of the work that is being done is, of course, to support our gross profit growth in the current periods, but there are also investments, among others, in conversational messaging using channels such as WhatsApp. These investments are taken through our income statement as OPEX, and we have very limited capitalization of resource costs, which we believe to be prudent. Please turn to page 24. On page 24, you will find a bridge from adjusted EBITDA to cash flow before changes in working capital. To explain the effects between these items, we see a delay in paid taxes in certain jurisdictions, primarily in the United States, benefiting short-term cash flow. In the quarter, we have significant acquisition costs related to the announced transactions of SDI and ACL as well.
Despite these, we see a cash flow generation from operations of SEK 127 million, or 72% in relation to adjusted EBITDA. Please turn to page 25 for the cash flow statement. The cash flow statement, the cash flow from operating activities was SEK 264 million, which is aided by a strong swing in changes of working capital. Change in working capital can fluctuate from quarter to quarter because many of our customers maximize their liquidity, and also that our rapid growth consumes working capital. In this quarter, we are especially aided by the low growth in the voice and video and the operator segment, which actually helps our working capital position. Of course, then we also did the new share issue this quarter, which we are very thankful for the continued support from the shareholders, contributing SEK 700 million to fund the announced acquisitions.
Moving on to page 26, just to briefly summarize the status of our ongoing acquisition and integration processes. In the case of Wavy, SAP Digital Interconnect, we are pursuing the regulatory approval and performing other steps. In both of these cases, there's also carve-outs to be performed, that is also being worked upon in parallel. We hope to be able to close both of these during the second half of 2020. In the case of ACL, we're expecting to close in the current quarter, in Q3. Then, of course, once we have closed both SAP and ACL, we will review our synergy assessments that were done pre-acquisition as well. In the acquisitions done earlier and already closed, such as TWW, myElefant, and Chatlayer, we're happy to see continued progress in all of these businesses.
TWW, I think, had a strong gross profit development also in Q2, contributing SEK 48 million in gross profit this quarter. In the case of myElefant, we've actually completed the first stage of the U.S. launch, continued integration with the Sinch platform is ongoing. In the case of Chatlayer, we continue to work on the integration execution into the Sinch platform. Moving to page 25, Sinch had a positive cash position at the quarter end of SEK 1.5 billion. I would like to state that the net debt to EBITDA ended at 2.1 times or negative 2.1 times. The financial targets for the company are unchanged from what we have previously stated. We aim to grow adjusted EBITDA per share at 20% per year and keep net debt to adjusted EBITDA under 2.5 times. Operator, please move to page 28.
Page 28 summarizes our financial leverage pro forma upon closing the announced acquisition. As announced, we believe that our underlying business performance will enable a timely deleveraging, enabling us to meet our financial goals. I'm happy to report that at the end of Q2, our pro forma leverage is already below our financial target, although this is subject to future business development and current situation until the time of closing these transactions. At current levels, we expect pro forma net debt over adjusted EBITDA upon closing all of the transactions to be at 2.2. With that, I would like to hand back over to Oscar to summarize today's presentation. Oscar?
Sorry, coming off mute. Thank you, Roshan. Operator, if you could move to slide 29, please. The key priorities ahead are obviously, continue to grow with U.S.-based global tech companies, obviously a key focus for us. We're also increasing our investments to broaden growth across the base in many different areas. We've done so both organically over the last quarters and obviously to a large extent M&A driven. That's an initiative which we're focused a lot on going forward and have been focusing a lot on. Closing of pending transactions is obviously key, integration planning for ACL, SDI, and Wavy, and obviously starting execution once those transactions are closed. Right now focusing on the integration of the transactions that are closed in prior quarters. We're also continuing to strengthen our connectivity offering in various areas, both on the voice side and on the messaging side.
We're investing in SaaS products for advanced next-generation messaging in order to catch the growth curve that is obviously coming. You only need to look at the Nationwide case to understand that pretty much any of our customers will have benefits from moving to the next-generation messaging. It will improve their business performance, and it will improve our ability to charge them, because they will need more software and more services in order to move there. That said, I want to thank you all for listening so far, and I want to open it up for questions. Operator, are there any questions for us, please?
Thank you. Ladies and gentlemen, we'll now begin the question and answer session. To ask a question over the phone, kindly press star one on your telephone and wait for your name to be announced. To cancel your request, kindly press the hash key. Once again, star one if you have any questions. Okay. The first question, it's from the line of Daniel Djurberg from Handelsbanken. You may ask your question.
Sir, thank you for taking my question, and congratulations on a strong Q2. Question is to Oscar first. You mentioned that the messaging volumes were taking up again in the tail of Q2. I guess that stems from societies opening up, and so on. Do you also have seen this in the end for voice and video, i.e., as ride hailing and scooters renting, et cetera, coming back a bit? If you could comment a bit on that as well.
Well, in voice and video, we see the verification business trending fairly well, or well, I should say, and that has been during all of COVID. Ride hailing, a bit, but so far not the major effects, I would say. Yeah.
Yeah. Thanks. If I may, another question on, you mentioned the work on the unified cross-channel API. Can you comment a bit more on this project and how important it is to consider yourself an early mover or ahead of your Norwegian colleague, et cetera, and the technology risk involved, et cetera, would be great.
We believe this to be a very important project. We're fairly well advanced. We're now trialing it in what we call as a closed beta, trialing with a set of customers and then coming closer to a launch. We're well advanced. We think it's a very important project because we believe that, as we said many times before, companies and customers will want to reach their consumers via any channel, via the channel where the consumer is. Obviously, they don't want to make 10 integrations to somebody like us to do that. They want to have one interface. We think this is one of the bread and butter APIs going forward. As compared to the market, I think we are not an early mover, not extremely late, maybe in the mid in this area. There are a couple of companies like Twilio are out before.
On the other hand, we think we are learning from what we've seen in the market and learning from the experience that we're doing and coming out with a solid interface.
Okay. Would you need additional functionality, you think, email or payment or whatever, to put in this cross-channel API, or are you quite satisfied with what you have?
I'm never satisfied. You should know that by now, right?
Yeah, I know.
I believe the basis is definitely there. I believe there will be new channels to be added. Email or not, I won't comment on, but I definitely believe there will be new channels, and there are multiple channels, yes, we'll focus on adding channels to it. I also believe that there are new functionality that can come, and that can come both in the terms of payments, is a very interesting area where when enterprises want to do payments in the messages or do payments in the voice calls, integrating that in a seamless way into your APIs is interesting. We're not going to be a payment provider, integrating those type of services, that's definitely an interesting future area.
There are also other interesting areas, such as adding more machine learning functionality into those interfaces or adding more software on top in order to let our customers code less. I believe there's going to be continued development of new solid features into these interfaces in other areas.
Okay. Thank you so much. I'll get back in queue, and have a great summer, all of you.
Thank you.
Thank you. The next question, it's from the line of Fredrik Sävje from Carnegie. You may ask your question.
You, operator. Hi, guys. Thank you very much for taking my questions. First one on the voice and video segment. I understand your customers in this segment are having a tough time, and you clearly see why volume should be down Q-over-Q. I'm a bit curious here on the gross margin. It comes down by quite a bunch in year-over-year terms as well. While if we look in volumes or at least net sales terms, year-over-year, it's pretty flat-ish. It used to range well above 30%, now at 24. Can you explain a bit on what happens with the margin here in this segment in this quarter? Thank you.
Roshan, would you care to take that one?
Yeah, just coming off mute here. I'm happy to comment on that one. I guess, when you're looking at the voice and video segment as a whole, I think you have to look at, as we always say, we have the mix between our products, verification and number masking, which are the two primary products we're selling in this area, as well as a mix between the markets where we're selling them, right? Just as we always comment, gross margin is a factor very often of what the operators charge to place calls in different markets. Therefore, it's more related to that rather than to our own sort of delivery capability.
That's super. Thank you. Another question, what we've seen in several industry reports here on the messaging side and on communications in general, that discuss that the adoption of messaging and conversational services as a complement to customer support in general has increased by quite a bunch in this environment. I'm wondering whether you see this adoption too. You did mention the Nationwide example, I'm sure Chatlayer, TWW, myElefant as well, there should be more. What kind of trends do you see here for the services that you have?
No, that's a very good question. We definitely see it. We see it a lot, obviously, in the Wavy acquisition. They have a lot of business in that area. They have a very fast-growing business, primarily focused on the customer care side. On SDI, we actually get a unit, which is an SAP Digital Interconnect. It's not really what you talked about. We see the combination of the Wavy Chatlayer and that unit to be very interesting. It's actually a full contact center in the cloud. We see on the Chatlayer side, large demands on their side, also a large demand from our existing customers of the Chatlayer service. We just came off a call from the ACL people who want to sell Chatlayer, for example. It's very interesting, that area.
I think it's driven, if you just drill it down what it is, a call to a contact center costs around about SEK 5. You can automate that, and you can do that via messaging, and messaging is very easy, or it's very suitable for automation because you get the information in a short text format. Basically, you can maybe automate 50% of the incoming calls, and therefore take down your cost in your call center or contact center to a large degree. I think that's a very interesting area, going forward for many of these businesses. That's kind of the core area, but then it's also the wider area, which is doing what, That's kind of handling incoming calls to a contact center, right?
Where I think a lot of the call volumes will move from voice calls to messaging, actually, in the core contacts in the world. You've got the wider area, which is more of the Nationwide example, which is they want to do customer communication, and how do they do that? You may do proactive communication, sending out the message to inform somebody in order to avoid a call or to actually to drive calls into them. That type of combination is not really contact center per se, but it's customer success, right? In the wider area. That's also an area where we see a lot of activity, and also a lot of interactivity between the voice business and the messaging business. You're 100% correct. We believe a lot in this area, in general.
It's very encouraging. Thank you. Again, on the messaging side here, very impressive numbers here from this segment. Can you say what kind of traffic you're seeing, like growth, or in terms of maybe by use case? I know in Q1, there was discussions on airlines, some from healthcare in general in the U.K., for example. Now in Q2, what is the big driver in year-over-year terms? Because I can assume that airline traffic has come down, potentially also from the healthcare side of it. It's two-factor authentication, e-commerce related. Can you share some flavor here?
Yeah, it's obviously a lot of transactions. It's a little bit hard to know. The major drivers here is obviously, like we said, the U.S. big tech, but the U.S. big tech, it may be in turn selling to other companies. U.S. big tech is definitely one. It's obviously banking. Banking and finance going strong. You also have the e-tail sort portion, is obviously also picking up very well. That's the three segments I should probably highlight as of today. Yeah, that's the three larger growth drivers, I think.
Very nice. Thank you. Finally, maybe one for Roshan. In terms of the negative SEK 11.4 million revaluation that impacts EBITDA, and I'm aware that monthly revaluation of the balance sheet happens, but I'm not fully grasping what creates this revaluation item impacting the figure.
I think there's two items, so just we separate those out, right? These are two items affecting adjusted EBITDA. I think firstly, one is, as the stock price has developed during the quarter, where every month we're doing an evaluation, or every quarter we're doing an evaluation of social insurance costs related to the outstanding options, long-term incentive programs, where we have such social insurance costs in certain markets, and we make a provision in our books for that. That, obviously given the strong share price development, which we're, of course, very happy about, but that leads to a quite large post into affecting adjusted EBITDA this quarter, which was around SEK 11 million. In addition to that, there's another, I think around SEK 11 million, which we talk about, which is reevaluation of foreign currency. That is, again, a recurring item that does come every quarter.
There's two parts to that. One is, as we pay accounts payable and receive money from customers, there's a difference in the foreign currency valuation between what we have on our books and what we get in, and that's called realized gains and losses. The other part is unrealized because everything that's on our balance sheet, we need to revalue at the end of every quarter as well, as per the current exchange rate. The combination of those two is another negative bit of SEK 11 million in this quarter. There's two of them.
That's very clear. Thank you very much, guys. Thank you much for those answers.
Thank you.
Thank you. Next question. It's from the line of Ramil Koria from SEB.
Thank you, operator. Good day, everyone. Just a few questions from my side. Starting off in the very short term here on the OpEx side. This is the second quarter in a row that you comment that you are going to halt recruitment to some extent. I can imagine that you have some lag to that as some processes are already underway in Q1. How should we reason now going into Q3 and onwards on the OpEx side, given employee benefit expense being such a large part of total?
Yeah, you're correct about it has a lag. We did much more conservative recruiting in Q2 than we were in Q1, but obviously the people coming in in Q2 were the ones we actually recruit signed in Q4 and Q1. There is that type of lag, so you're 100% correct about that. What we will do in our strategies, obviously, seeing the COVID effects, and riding those out and understanding those, and therefore, we wanted to be conservative and making sure we can continue to deliver good numbers. As the months pass by now, we feel gradually more and more secure about what do we believe the COVID impact will be for us, even though it's hard to judge what is the second wave, what's going to happen, what's going to happen with the long term, economic downturn, upturn, whatever.
That's obviously for us, and probably for you as well, hard to judge. That is the strategy. Keeping it tight until we see the effects, and then setting a new strategy after that. We're still at that stage. We're still holding tight, but we're then obviously specifically releasing some OpEx for integration. We cannot do this amount of work, cannot do this amount of M&A without actually taking care of the acquisitions once they come and making sure we can reap the benefits from synergies, et cetera. There we've made one round together with the board of releasing a set of OpEx. Long term or medium term, I think you should think about, we will match our OpEx to our gross profit development. As long as we see growth, we will let OpEx trail the gross profit development.
If we see weaker growth, we will keep OpEx tighter. That's very much our strategy along with the lines of the EBITDA per gross profit type of graph and keeping that at base or we've been around 45%-50%, and that's our strategy going forward as well. As long as we hit and continue to hit our OpEx targets, then we'll let our gross profit targets continue to trail OpEx to that. Was that clear?
Super clear. Yeah. Just a follow-up on that. Shorter term, if you do halt investments, and I reckon there's nuances to being tight on recruitment. If you do, say, halt recruitment in the shorter term, and you obviously have a tailwind with especially U.S. big tech, presumably you'll see a margin expansion in the coming quarters unless you start unwinding you being tight on the recruitment side ASAP. Am I missing something?
No. Yeah, you're correct in theory and in practice. On the other hand, we're then saying, "All right. When we see the volume increase with those areas, what do we need to support?" We have a discussion with the board and saying, "What are the investments we needed to take in order to support the growth?" Then we kind of release smaller chunks in order to support that growth. That's very much focused on near-term gross profit growth, if you will. Yes, you're correct.
On the other hand, I think maybe the more important one is that we're actually trailing OpEx to GP in the longer term. You're correct in that sense, yes.
Yeah. That's fair.
I need to say in that context, you have the M&A playing in as well, right?
Yeah.
Which is, okay, we need to take care of those. We need to reap the synergies, so therefore, we need to be aggressive on that side, even though we're conservative on the other side, if you will. Which will also, of course, skew the short-term picture a little bit, because synergies don't come quarter one, basically.
I see we're running out of time, let me ask a few more, if that's fine. On the transaction volumes, in Q1, you were quite clear that March was an exceptional month. We're seeing a tick-up now in June. Should we consider that fair to extrapolate, or was there anything extraordinary in that number?
I would say, June was a good month. It depends what you extrapolate. We're expecting volume to increase in the trend that we have seen before in the little bit more long term, yes. Of course, extrapolating, it depends what point you make. We don't see anything specific yet in June.
I don't think we should take a lot of conclusions out of one month's traffic trends.
No. That's their view . Okay. Then on the U.S. big tech side, could you say anything about share of wallet with your biggest accounts right now, and perhaps if the growth we've seen in the last few quarters here is driven by a larger share of wallet, and how much is driven by growth with the customer as such? Any flavor on that would be very helpful.
Flavor is both. I think we are both growing with the customers as their volumes are growing. We're also growing share of wallet, and we see that it's possible to continue to grow with share of wallet. These companies are extremely large. Like I said before, just the five largest is the same size as the entire German stock market. It would be to have every single German-listed company as a customer, and they would all be heavy customers of your services, and that's only the top five, and we're talking 10 here. Very large companies. There are definitely room to grow, but it's obviously a hard fight for any revenue SEK or gross profit SEK to get. These are also very well-known brands and competitive situations.
I think we'll need to move on to other questions from other askers, if there are any more in the queue. We have some on the web call as well.
Would you like to take the next question?
Yeah, next person asking, please.
Okay. The next one, it's from Fredrik Rejle from Danske Bank.
Yeah, thank you. My questions have been answered. Thank you. I hope you have a great summer. I can say that. Thank you. You too. Thank you.
Likewise, for sure.
Okay. The line of Fredrik Sävje wishes to ask a question again.
Hi. Thank you, operator. I have one follow-up on the partnership with Ericsson. I think in this report you make quite a number of this, more so than you've done before on the partnership on 5G SMSF. I think when you first announced this, it was a bit vague on what kind of value you would make here, and now you're sounding bullish on this. Have you gotten more clarity on this side as you do seem more optimistic on the generation you can make? Can you say anything on how this partnership is structured and how that will impact you financially?
Thomas, maybe you want to answer this. I think you're a little bit closer to the people delivering the service.
Absolutely. I think what we're seeing generally speaking is a very positive and good collaboration with Ericsson around this project. I think it's clear that Ericsson is a leader in this space, doing very well. In that sense, we think there's a positive trajectory here. There are lots of assumptions you have to go to gauge the financial scope, what this could result into in terms of how operators choose to enable SMS functionality in 5G networks. There are different routes and different parts of the tech stack that an operator can use to power these services. I think what we're seeing is that a little faster than expected and very positive early feedback, too early to quantify in any meaningful way.
What's happening right now, it's being pitched to the large operators in the world. That's the status, and we need to see what's happening. On the other hand, you should also, context-wise, you'd put that in the context of the operator business, right? You just have the context of the size here. It's not affecting the main business of Sinch. It's more on the operator side. It's a very good deal for that side of the business.
Fantastic. Thank you very much.
I think we have a few questions from the conference call that I wanted to bring up. First, we have RR. I think that's close to an anonymous asker, but we'll put your question through. Saying, "You said you're a leader in North America. How do you see your competitive position compared to Twilio? What we understand is the leader, not Sinch." Oscar, I think I'll leave that with you.
Yes, Twilio is the largest player in the CPaaS market in general. Yes, that's true. I think we are a leader, one of the leaders in North America, Europe, India, and Latin America. I'm by that not saying are we exactly the largest, but one of the absolute leaders in those markets. Yes, we're definitely at those volumes together with all the acquisitions were made. Compared to Twilio, if you would compare the two companies, we said this many times before, and we respect Twilio, we think they're a great company. Twilio is stronger than us on the developer go-to-market and marketing-generated lead funnels. They're much stronger on that side, and they have a much wider base of customers and a much wider base of small customers.
Twilio has a lot of large customers as well, but if it were in general, where they're stronger than us, so they're stronger than us on that side. Twilio also has a broader product portfolio. They have more software services, and they also acquired an email company, et cetera. They have a broader set of software services and also into email and a set of other segments where we are not. Where we are typically stronger than Twilio is high-quality international delivery. Twilio does not own their own network. They don't own the operator connections to a lot of operators around the world. Actually, they don't own operator connections even into the U.S.
On international high-quality delivery, we typically stand up very well to Twilio, and that's why you can see, obviously, our strong growth on the largest companies in the world, because when these companies want to find the suppliers, they typically want to go to the source, and then there we are a very strong contender. Obviously Twilio is moving in this direction. They're strengthening the network, and we are moving in the other direction. It's not black and white, but if we stylize it, that's the main difference.
Thank you for that, Oscar. Yeah. Oh, sorry. Go, continue.
Yeah, I would also say, I think having good competitors is always good. I think there will be a set of leaders in this industry, a set of winners in this industry. I do believe that Twilio will be up there, and I do believe that Sinch will be up there. All right, Thomas.
All right. The last question, I think we'll answer this jointly. The question from Kasper Erskine is: "What % of revenue is currently generated from U.S. tech companies, and how does this develop over time, and what additional services can be sold into this space?" I'll start with the first part, just saying, we don't give the statistics on the size of different customer segments. Perhaps to give some color on it, without the numbers, Oscar.
Could you repeat the question again? I missed the last part of that question.
Yeah. First, it's basically how does the U.S. tech companies, our business with the U.S. tech company, how does that develop over time, and what additional services can be sold into this space of customers?
Yeah. It's obviously, like we're reporting over several quarters, it has been developing very well. It's one of our growth engines. I think when you sit with those type of large companies and you're delivering a good service and you're doing that quarter by quarter, you get the chance to pitch for new businesses, and we have a strategy to do that, and we see that happening all the time. We obviously hope that will continue. The type of services that these companies want are similar to some others, but not all others. They're very data-driven. They typically want automation in any form because their volumes are so large. They typically request APIs to do different things than to send messaging.
It may be APIs to set up accounts, APIs to get the data in a specific format, APIs to understand the performance of the delivery, since they actually automate the routing based on performance. Various forms of APIs to automate their own business and their own purchasing and their own understanding of what they buy from us is one category. They are obviously then interested in the quality. Moving from selling just this message is delivered, to moving to sell in a verification space, you move to sell this phone number is verified. You may add the kind of data-driven analysis before it, so you actually sell on a higher level. You sell the quality, and you don't sell only the message delivery is another category.
We see an increasing interest on the new or next-generation messaging side, where we do see interest from all of these businesses, from some parts, but not from other parts. That's another area which is interesting. We see an increasing demand on the voice side from quite a set of those companies. That's probably the major areas also today.
That was a good list. I think we're a bit over time, I think we had some questions in the queue coming back again. I think we'll finish up at this stage. I thank everyone for participating. I hope to keep you posted in the future as well. With that, I'll leave for some closing remarks to you, Oscar.
Thanks a lot. Very happy to have you listen to our quarter report this quarter, and happy to report strong numbers. We are looking forward to work hard to continue to do that and continue to report strong numbers in the future. That said, I want to close this call. Thank you all for listening.
Thank you.
Thank you.
Thank you.
That concludes our conference for today. You may all disconnect. Thank you all for participating.