M&A Announcement

May 5, 2020

Thank you very much, operator. Good morning, everyone, and welcome to this conference call about FINCH's acquisition of SDI or SAP Digital Interconnect. With me on the call today is our CEO, Oskar Wainer and our CFO, Roshan Saldanha. And with those opening remarks, I'll hand the word over to Oskar. Thank you, Thomas. So welcome to this morning's call. We're very happy today that we have agreed with SAP to acquire a business unit there called SAP Digital and Connect. This is a business unit that has been in this market for a long time. So it's one of the long time messaging companies in the industry with company owned and over many different years. And now we have reached an agreement to acquire that business unit. So if we move to Slide 2, please. So these are now our numbers before the consolidation of or an integration of both Wayby and SAP Digital Interconnect. So revenue of some $5,600,000,000 adjusted EBITDA of 6 46,000,000 last 12 months. And market cap is up to the market, but that was one of the days where Thomas I think it was a day before or something when Thomas took it, 7 of 66 people and present in 33 countries. And as many of you know, who's been on these calls before, we do customer engagement through mobile technology and basically providing enterprises with tools to communicate with their consumers via messaging, voice and video. We do 40,000,000,000 engagements per year, and we serve 8 of the 10 of the largest U. S. Tech companies in the world and thousands of enterprises around the as well, mainly in a couple of segments. That said, this slide has been similar. So I will go on to look at a little bit more detail into what we're doing on this transaction. So operator, please go to slide of the 3 trees. So here we see a technology evolution in messaging, and we're going from text notifications that is outbound messages via text messages to richer media messaging with all the new OTT channels and new channels that are coming, such as WhatsApp and Facebook and RCS and WeChat, the KakaoTalk and Lime, Viber, etcetera, which gives us ability to not only send 160 character text message, it is also possible to send videos, picture messages. You can have action buttons. You can have conversations. You can, in principle, make the message to the same inbox as you today receive a text notification look like an app. And needless to say, it can be much, much more powerful interaction if can have all the functions and features of an app into a text message. And then moving also to conversational messages because users can also not only can they get richer media in their message, but they can also start responding to the messages. And enterprises are able to track that an outbound message is related to the inbound message, and thereby, you can start to have conversations within the messaging channel in a way that is much, much harder if it's only a text notification. In this, if you go to Slide 4, please, operator. In this, we have relevance in a couple of different categories throughout the customer journey. The type of messages we do are typically as part of the customer journey, and it's practically integrated in as an integral part of Enterprise's customer journey and can be for the purposes of revenue generation, service enablement or customer care. The revenue generation may, of course, be marketing, but that's a smaller part of it. The bigger part of it is something that is integrated into the Enterprises customer care or customer journey but has the purpose of generating revenue. It may be for reducing your churn or it may be for increasing customers in store or store pickup or something like that. And service enablement is examples are one time passwords, 2 factor authentication, verification, but it may be also be mobile boarding pass. And customer care is, I'd say, a relatively large trend where the customer care industry is moving from calls and online, going to maybe chat, they're moving portions of the traffic over to various messaging channels. And basically, imagine you're sitting in a line and you're waiting for a response and from a large enterprise, let's say, a large ship healthy company and you're sitting there and you get a voiceover and by voice saying, hey, you can also WhatsApp your question to this number. And if you do that, you may get response quicker, but you will remain in the line if you would rather speak to an agent. And then you may in the line there what type of question. And if it's a relatively straightforward question, that can be automated, and then you can get your answer via WhatsApp instead. And that's a large trend or growing trend in the customer care industry. To the customer care user, that becomes instead of paying or to the customer or to the enterprise it becomes instead of paying on average maybe around $5 per call that reaches the customer care center, you may pay $1 or $0.50 or something to a messaging provider that has both the messaging channel and an automated AI to automate the bots, which is, needless to say, a lot lower cost. So let's move to the next slide, please. So our playbook for profitable growth has been to focus on 2 areas. It's been the connectivity area where we ensure the connectivity between the enterprise and the consumer without middlemen, maybe on the voice side, maybe making sure the call is completed or in video, make sure the video call or video link can be set up. Or in messaging, it is making sure we deliver the WhatsApp a WeChat message or text message. And on top of that, we see a range of attractive software as a service or software module that enterprises are asking for and that if we provide this additional software, we can charge additional fees. And the software as a service becomes more or becomes a pure SaaS model where the connectivity because you don't have any cost COGS, you don't have any cost of the goods you sell. And so it becomes like a pure SaaS model with more 85% margins on average or ramp up. While the connectivity business is you have COGS, so therefore the gross margins in percentage times obviously becomes lower because you pay fees to the other key providers such as WhatsApp and WeChat to the operators. So let's go to next slide, Slide 6, please. We have been very clear on our M and A agenda. We do M and A in the scale and profitability area and in the technological market where the scale and profitability, typically we acquire sticky customer relationships, a strong customer basis. We acquire direct operating actions in the markets. These are little bit larger companies and almost always profitable. So we add to our network operated connections and more volume to our network. And if you go to the technology and go to market area, it is we're typically acquiring smaller companies with complementary technology and go to market abilities that we see, all right, this technology and go to market ability we would like to complement our offering to offering with in order to increase the software value added high gross margins. So operator, if you go to next slide, please. So here, if we place SAP and digital integrate into those buckets, we have done we have lined up our acquisitions in those categories. And if we place SAP, it's the main reason is on the scale and profitability side here. It mainly adds to our network of connectivity. On the other hand, this is a large company. So of course, when you are large, it will also add new areas and new technology bits and new offerings that we don't have. But the primary reason is on the scale and profitability side. So operator, if we go to Slide 8, please. So if we then speak a little bit about what is SAP Business, correct? It is a global cloud communication to others, operations in the Americas, Europe and Asia Pacific. It has 3 business units. It is programmable communications, which is primarily messaging, which is 67% of its revenue carrier messaging, which is supplying software and services, often as a service to operators. Primarily, this is on the P2P side. So SAP provides software and services to operators to handle their P2P messaging, and they do so to a couple of the world's largest operators, both in the U. S. And Europe. And it has an enterprise solutions part, which is around about 5% of the revenue, where it has a contact center solution and a couple of other solutions as well. SAP Digital Integrator can do 18,000,000,000 messages on the enterprise side, which is where enterprises are supplying messages to consumers. That is the number we typically relate to as Cinch before Wayby and SRT, they did 43,000,000,000 messages. And so that's the main business of Cinch. And SAP also did 292,000,000,000 person to person messages in 2019 to operators. This is obviously a very high number. This is more related to the operator business where you supply the software and service to operator to provide the P2P message. Obviously, that's a much higher volume in the market, but also a much lower as you can see above from the revenue from the 2 different parts, a much lower revenue per message, if you will. But it's very strong, obviously, to be able to handle successfully such a large metering volume. SFP Digital Integrator is around 3 20 employees with headquarters in San Ramon in California. It also has offered offices around the globe in roundabout 30 countries. I think it's 33 in total. And our footprint will go from 33 countries to 39 countries. So we have employees in a large number of overlapping countries. The deal rationale of this transaction is very straightforward. This is a business we have known for many years in the market. And when SAP decided SAP, mother company, decided to enter a competitive process to explore a sale of this business unit, we were very interested. And the reasons are, 1st and foremost, the customers. SMD Digital Interconnect comes with 1500 enterprise customers, some of the world's most valuable brands, which diversifies our customer base and gives us access to long standing large enterprises, which are very attractive to add to our mix of customers. Number 2, it's accretive. So this is a highly accretive deal which fits very well into the scale and profitability category. Number 3, it significantly strengthens our U. S. Presence. We're doubling our staff in the U. S, which is our biggest market. It also adds a lot of people in both Asia Pacific and Europe, which strengthens our offerings and markets and go to market abilities in those markets. And the third one is, obviously, here, it has very strong operator relations and functions as a trusted vendor to hundreds of carriers and some of the largest operators in the business, which in our business model, which is two sided, you have the operators on one hand and where you're purchasing capacity and need to have strong relations with. And on the other hand, you have enterprises where you sell that capacity refined form with more software value add. It's very important to work on both ends of that spectrum, both the enterprises and the operators of the provider space. Integration, we this transaction is subject to review and approval from competition authorities in multiple jurisdictions. So we are engaging with those models, And we expect that to go through. We do not see that we get too high market share in any market. But obviously, we will submit it to the regulatory authorities, and we will work closely with them and have good cooperations with the regulatory authorities. But we need to wait for approval before we start the integration here. And we will combine operations across U. S, Europe and Asia. And we see there are synergies in a couple of areas, both on the SMAS platform integration and on a separate core functions. And this can come both from the OpEx side and it can come from the COGS side, basically pooling the operator connectivities and the deal with the operators. And if one company has a stronger agreement, then you would use that agreement obviously on the global level. And we see both cost and upsell opportunities, both same chain SEI product portfolio. Financials, we pay enhanced by the value of €225,000,000 SAP Digital Intercorrect recorded revenues of €340,000,000 and a gross profit of €94,000,000 and revenue growth has been around 10% in the last And revenue growth has been around 10% in the last 2 years with the programmable communications business units growing the fastest. And again, I mean, closing is subject to regulatory approval, but we expect the transactions to close in H2 2020. So let's move on to Slide 9, please. So the programmable communications being the largest business unit here, the products are programmer communications, APIs and developer tools and digital interfaces, similar to what FinC is driving. It has a verification and an authentication business. It has omnichannel capabilities with SMATS, email, WhatsApp, WeChat, Viber, etcetera. It has single point APIs with rich failover capabilities. It's processing 8,000,000,000,000 enterprise assets in 2019. The go to market is similar to what Cinj is offering, and it's a value proposition built on high quality of service in international reach and in presence in some public countries here. On the customer side, some 1500 blue chip enterprise customers, very strong brands. It's a strong customer base with many of the world's most well known brands, and it has a low churn over the years. And the split of customers, you can see below, bank and finance and technology being large, but also telecom operators being a large customer base. And this is not on the P2P side. This is on the ATP side, so basically providing services both for the operators to communicate with their own enterprise basis or on their own consumer basis or to operators to use as a tool to sell to their enterprise bases. Marketing being a slightly larger and then a large set of other segments that is being targeted, but there you have the overall split of customers in an industry verticals. And so programmable complications being the largest 6%, 7% of STI revenues in the last 12 months. So let's move on to the next slide, please. Carrier messaging, like we said, dollars 292,000,000,000 person to person message is processed 2019. It has intelligent hubbing and dynamic routing for person to person messages between carriers, so supporting carriers on the P2P messaging side. And it has a messaging proxy to allow carriers to handle messaging on a person to person basis in a single solution. And it has very strong relations and service quality to several of the world's largest operators. And SDR and the carrier measuring portion is roundabout28% of SAP Digital Incorrect revenue in the past 12 months. Then we have Enterprise Solutions being the smallest part, run by 5% of SBI revenue in the 12 months. The largest portion here is a Compact Center 365, which has an on prem as a private cloud and a public cloud solution as a Compact Center. And it has a set of other solutions for enterprises, so a message manager and being more of a tool for enterprises to send messages to the consumer base. It has an IoT offering, a smaller IoT offering, and it has a PeopleConnect for workforce disruption communications. So enterprises can subscribe to this in order to a SaaS tool in order to when there are workforce disruptions, certainly use this tool in order to communicate to its consumer base in an omni channel fashion. So a set of solutions in the enterprise solution space, but the contact center being the larger part of this smaller unit. Let's move on to the next slide, please. This is Slide 11. So on this slide, you see countries with local sales that Cinch has today. And as you say, we cover with local sale large portions of the globe. And we are continuing to strengthen our offering. This is a very large market. Top of market sites of messaging is run by $20,000,000 and the voice business is maybe $15,000,000 and then the video being a couple of $1,000,000,000 So it's a very large market. It is a very large portion of the enterprises in the world are doing this are using these transactions. I typically say any country you can go to banks and they are doing this type of messaging or voice solutions. So therefore, a very large portion of the world's enterprises are potential customers. So but here you see the distribution network. And the super network, our scalable cloud platform is obviously a large portion here, which is being strengthened by this deal. So let's go to Slide 12, please. And with that, I will leave over to Roshan, our CFO. Hi. Thank you very much, Oscar. Very good morning to all of you, and pleasure to be here talking about this really fantastic transaction that we announced today, which will add a significant number of customers, the blue chip customers to our customer base and also strengthen our market presence across the U. S, Asia, Pac in Europe. And not only that, it will also add a lot of scale and profitability to Synchro's existing business together with the acquisitions that we have already announced in the form of Wavy that is not yet completed or that would be completed in the second half of twenty twenty. So on this page, Page 12, you see sort of the pro form a numbers based on the last 12 months outcome for Cinch as well as for the announced not yet closed acquisitions of Wavy and SAP Digital Interconnect, and that would combined to give us a net sales of over SEK 10,000,000,000 on a last 12 month basis and a gross profit margin of around 27% or SEK 2,700,000,000 of gross profit during the same period. We're happy to see that SAP Digital Connect is also a business that is focused on profitable growth, and they have been profitable over a period of time. And that profitability then combined with Wavee will take us to just over SEK 900,000,000 in adjusted EBITDA. If we then add the run rate synergies that we have forecasted, the midpoint of the run rate synergies both for VAVI and for SAP Digital Interconnect, that would take us just over SEK 1,000,000,000 in adjusted EBITDA. Now remember that the synergies are not coming are forecasted to come over the next 18 to 24 months. These are primarily cost synergies, both in the COGS area and in the OpEx area, And some of them are related to consolidation of platforms, which is expected to take some time. And then finally, on the employee front, I mean SAP WAVI, of course, Time Warnerly being a South American focused business and SAP Digital Connect having presence around the world with significant presence in the U. S, the major countries in Europe, but also a few locations in Asia Pacific where they have significant presence, we're totally bringing us over 12.50 employees and consultants when the deal is closed or when the deals are closed. Turning to Page 13, this shows you our financial leverage. At the end of the Q1 2020, we reported a financial leverage of negative 1.0, so net cash position in hand. And then with the acquisition of Catlayer, that would bring us to negative 0.8 in financial leverage. If we were to close SAP Digital Inconnect with on a pro form a basis, that would bring us to a financial leverage of 2.2. And then adding on top the Wavey acquisition and the closing of the Wavy acquisition that would bring us to a financial leverage of 2.7, which is well within the constraints set by banks and corporate bond covenants. Turning to Page 14, again, a reminder of our main financial targets. As communicated before, we aim to grow adjusted EBITDA per share with 20% per year and keep net debt over adjusted EBITDA under 2.5x over time. Looking back historically, we're proud to say that we've consistently delivered a strong growth in adjusted EBITDA per share and grew 15% on a rolling 12 month basis at the end of the Q1 2020, a large part of that's coming organically. And also that net debt over adjusted EBITDA was at the end of quarter 2020 in a net cash position of negative 1,000,000, thanks to the strong support we received on the share issue that we did at the end of the Q1. With those words, to conclude, I would leave back to Oskar. Oscar, I think you're on mute. All right. I was speaking into mute, saying lots of great things here. Sorry about that. So with that said, that was the last part of the presentation. So with that, we will leave over to questions questions of this exciting transaction. So thank you for your time, and then feel free to answer any questions. Thank you. Ladies and gentlemen, we will now begin the question and answer Our first question comes from the line of Daniel Dubeck for Anders Banken. Please ask your question. Your line is now open. Thank you very much and good morning, gentlemen, and congratulations to another interesting consolidation over here. Two questions, if I may, on the same topic on integration. It would be interesting to understand if it's more of a plug and play, I. E, with the STI seems to hold a similar setup as Cinch with a program and communication carrier enterprise. Will it be a direct integration of these into Singe Messaging Operator, Voice and Video? And also if you can tell us a little bit more on the integration of the SMS platform since this is a bit both LiSS and Wave is a bit larger in really more or less like mblox, if it would be more complex integration of the SMS platforms, etcetera? Thank you. The first question relates to where or what business unit it will be integrated into. So first, you need to know there's been a competitive process. So we have received less information and less access to the team than we are typically provided because it's been a competitive process. So the first stage for us is to speak and get close to the team and understand the teams. And based on that, we will make the decisions on exactly what business units are that it is it going to be in. So that question on the overall level, I will we will need to get back to because we think it's respectful. We want to understand and learn from this team and understand their best practices and then we can decide. But generally, on the largest part, programmable communication, yes, it is combining the programmable communication or messaging business on the SAP Digital Direct with Cinci's. That's fair to be said because again, that's the obvious one, right? And that's the business we know the best here. So that's straightforward. And your second question, if you can repeat that, please? Yes. It was on the integration of the SMS platform. Historically, mblox was a bit more larger, of course, bigger and also, I guess, way we will come into the play now. But otherwise, you have done quite smaller acquisitions and easy to integrate on the Nova platform and so on. But is this those Weyvian and STI, are they larger, Shanghai, larger process? Will it be take more time and make done stepwise customer by customer? Or how to think of the integration of the Haislmets plant? Yes. These are I mean, these are larger companies and that has two aspects, right? 1, the integration process takes longer time and you need to be very careful with all the customers, of course. That's our main focus. So yes, this is more to be M Blocks transaction in terms of length of time and how long time it takes. We obviously need to make individual plans for each business and the business is individual. But yes, it's more to be compared to that. Then we should obviously say that at the time of making the Embraer transaction, Cinch or CNX then was a much smaller company and then it was, I think, was 80 people or something like that on the CNX side. So we're now significantly larger. But yes, it's more relative to that. The other aspect when you make larger transactions is obviously it has a if you are 300 people, then you have a very stable operations yourself. So it's easier to handle a transaction because it has a well run management team and well run processes and systems on its own right. So it's a more stable business and a larger business that you take over that has been existing for many, many years. So you also have a little bit more time to do these things. But the comparison to MLOGS is correct, yes. Thank you very much and good luck. I will get back in queue here with more questions later on. Thanks. Thank you. Thank you. Our next question comes from the line of Fredrik Sanovich from Carnegie Investment. Please ask your question. Your line is now open. Thank you, operator. Thank you very much, guys. Very interesting transaction today. A question on the historic growth rates here on SDI. I think you mentioned 10% growth in the last year. Can you say a bit more in a longer perspective how it's been for SDI in both net sales, gross profit and EBITDA? And also maybe on the profitability level of SDI for the past 3 to 5 years, just so we can get a sense of how the margins have developed here prior to you acquiring the business? So Thomas or Oskar, do you want to take that question? Yes. I think I'd like to comment on that briefly. I think, Priedak, I mean, firstly, I think the numbers that we state, that's consolidated for the company on a net sales basis, right? And I think the in terms of if you look at the 3 segments, right, programmable communications, as we've said before, is very similar to our messaging business. And in that sense, the mechanics of the business and then the gross profit very much follows sort of where we're terminating traffic or where the business is terminating traffic. And that business has a slightly higher growth rate than sort of the overall business growth rate. I think that's safe to say. On the carrier messaging side, which is the P2P communications, while P2P volumes have sort of stabilized or declined sort of over a period of time and this is not a message this is not a business that is growing significantly. So it's slightly sort of either at the stable or declining mode. And then the Enterprise Solutions business, of course, I think there's a combination of on prem and cloud solutions that they have, and that business has a growth rate. And you could say that's slightly slower than the total growth rate for the company. I don't know if those comments help you a little bit to get a view on this. When it comes to EBITDA on the different segments, I think that's nothing that sort of we can comment at this point in time due to the reasons that Oscar explained on sort of access to the business, etcetera, earlier. Okay. Super. I understand. I was just wondering if whether like this division has now reached a 5% margin this year when it was loss making in the past years. I mean just has it always No, no. I mean, in that sense, the trends are very stable. So there's no there's no sudden changes in the trends. Sort of the trends that I explained are sort of are stable and sustainable, we believe. Okay, super. Thank you very much. Yes. I mean, large messaging businesses in this space are typically profitable, and this is no exception. So this is a business we understand that no one that looks very similar to other companies in this space, and they're all solidly profitable over many years. Our next question comes from the line of Friedrich Lisel from Danske Bank. Please ask your question. Your line is now open. Thank you. Congrats to a great acquisition. Hope you are all well. Two small detailed questions maybe. The first one is you're adding around 100 carriers carrier connections. You already by yourself have around plus 300 or something like that. Are there any duplicates that does that mean anything? Or is it is are these sort of 100 new ones that are a follow a follow-up on that one, is this any white spots that you cover now? Is it, for example, direct connections to Indian operators or any other places that you can highlight? Thank you. I'll stop there. Thank you. There is obviously, I mean, this is a global business that is flying Floxed Enterprise around the world. So obviously, there's a large overlap of connections, but there are also new ones. But it may also be so that the there is an overlap, but there is a special feature or a better rate or a better access or a better capacity or something like that on one of the connections. So that's a detailed comparison. But I think it falls in the large number of overlaps, a set of new and the 3rd categories on the overlaps, a percentage of them will have different price and functionality. And so we do think it adds to our operating network in a good way. Are there any white spots? That's a more detailed analysis that we need to go through. We know a couple of countries that are that look very interesting, but it requires a more detailed analysis and not something we would disclose publicly. But it's yes, there are a couple of areas which look interesting from a top level perspective. I think that was answering all your questions, right? No, absolutely. I step back into the line. Thanks. Thank you. Thank you. Our next question comes from the line of Ramiel Coria from ZEB. Please ask your question. Your line is now open. Thank you, operator. Thank you, gents, for taking my question here. Just one high level one before I step back into line as well. I mean, SAP is obviously a pretty big entity, at least to say. Presumably, they've bundled quite a bit and upsold the digital interconnect offering as well. Are you in any way contractually sort of protected from short term customer churn as customers all of a sudden have 2 vendors? Or should we sort of expect this unit to have been separately managed for quite some time given its history? I think you should assume this unit has been separately managed for some time. This has been and that's probably one of the reasons you would have to ask SAP, of course. But it's been a separate unit that comes from previous acquisitions of SAP, so it's been run separately. So we don't expect churn as a result of that. Obviously, in a transaction, there's always a risk that customers review their offerings and review their suppliers and etcetera. So that's a risk we always take in the transactions and that's something we always count into the business cases, both on the positive and the negative revenue synergy case. But we see no other no larger risks in this transaction than any other transactions we do. And very clearly operated separately by SAP for quite some time on the customer and revenue and the core operation side. And so what has been integrated here is more the finance HR functions has been provided more from the SAP motherships while the other core functions, customer facing functions has been run separately. Our next question comes from the line of Daniel Twitberg from Handelsbanken. Please ask your question. Your line is now open. I'm back. Yes, a question I could would be on the revenue model in SDI program and communication. As you mentioned, SMS, push, e mail, WhatsApp, WhatsApp, Viber, etcetera. Still, would it be similar very similar to Cinch revenue model or a bit more like SAP with a little bit larger recurring or true recurring revenues than Cinch? Or is it a direct copper cap, you could say, or not a copper cap, but similar to Cinch? Yes. I think this is very similar to Cinch on that side. On the Enterprise Solutions side, it is different with more SaaS revenue, higher margin, longer contracts. So and that's not only on the contact center space. That is they also place their a part of their value add to enterprises they place in this category. So there, you have a little bit of a difference to the classic Cinch, if you will, while then Cinch is also moving in the same But the classic SENSIMS should have a little bit of difference there. But the programmable communications part is primarily similar. Perfect. And also, if I may, on the operator side, you offer the firewall and the RCS as a service, etcetera. Do you see a decent upsell opportunity for those products towards the or the carrier business for SGI? Or can you comment a bit on that? So typically that's a good question. The typically we that's not the rationale for making this transaction. And the main reason being the S and P supply is the world's largest operators with services on the P2P side, while our target focus has been smaller carriers and operators basically. So no not any direct translation, direct cooperation there. And now with the SMSF and Ericsson Corporation, we are actually starting to supply the water service operators as well from the from our operated business unit. But if you're looking for material benefits, no, that's not the case. Our next question comes from the line of Frederik Littel from Danske Bank. Please ask your question. Your line is now open. Okay. Thank you. Roshan, maybe on the synergies here, as it has been sort of a more competitive process, have you been able to look into the operations in such details so the synergies are pinpointed? Or is it so that you have done a proxy on what you think you can be able to what type of benefits you would be able to reap on the size of it all? How have you come by the synergy sort of in your calculations? Thank you. Yes. I mean, thanks, Rodrik. As I think it's not a of course, we have limited access to English process. But in a broad sense, I would say it's not different than any other acquisition that we have done. I mean, at this point in time, we have had typically access to a limited number of people, more limited in this case than in other cases. And but the good part is that SAP Digital Linked Connect has been existing for a number of years. I think it's one the pioneers really in this space. And we have people on our side that are quite familiar with that business, and we have good experience from previous transactions. I think we mentioned mblox, which was really success execution for pharmacy and Xcinch as a company. And that combination of knowledge and experience makes us fairly confident on sort of on the overall synergy levels that we are communicating. The synergies are in the OpEx and then in the COGS areas primarily. And I think, obviously, as we go into the next phase, both until closing but primarily then after closing, when we have full access to the business, we will further refine these plans. And but that will we're confident on the level of synergies that we communicate now. Okay. Thank you. And maybe a second question, if I may, while I'm still on. The Carrier Messaging Business Unit and maybe also the Enterprise Solutions, I'm not really sure here. But it seems like these will these 2 smaller divisions of SDI will fall into the your operator division. If that is so, if that is your thinking, do they have similar types of business models? I'm not sure if that was Daniel's earlier question. It might be a repeat question then. But is it the similar type of operations they are doing that you're already doing in the operator division? Thank you. So good question. First, the carrier messaging is obviously supplying operators. So that could be argued, and we haven't made the decision to merge together with our Opera Business Unit. But that's something we need to speak to the organization. The Enterprise Solution is not supplying operators with services. So that's both on the contact center side and its value added services to enterprises. So that should not be a group together with the operator business unit unless we decide anything differently. But from the outside, no. Business model wise, it's a little bit different if we talk about the carrier Macedon because this is a it's a more yes, it's obviously higher volume and supplying services to larger operators. It's a different product set because this is P2P messaging. So we are primarily supplying the software for SMSCs, which do P2P messaging as well. But this is more a managed service offering, which where you actually operate the platform as well. So it's a little bit different to our operating business unit. But it's obviously falling into, again, similar categories. But this is not a product offering we have and a little bit of a different business model as well on the operator side. And on the Enterprise Solutions, I think I'll answer that. That's completely to the operator business unit. Yes. Thank you very much. I'll go back to the line. Maybe for the benefit of the audience, it was like on our operator business, I mean, we're selling software. The typical buyer is either the network function or the IT function within the companies, within the operators and they're buying SMS software to run their businesses. The carrier messaging business that SAP Digital Interconnect has is typically sort of the carrier departments or the wholesale departments that are the buyers. And this is what we're what SAP offers is an outsourced hub based messaging Internet working, right, that provides simplified routing, that provides cost savings. So it's a slightly it's a different product. I mean, not commenting on your question on how this would be organized because as Oscar said, I don't we're ready yet, but just to explain a little bit on the differences between the product. Yes. So SAP's business is one step closer to our enterprise business, if you will. It's a little bit it's more the same departments as we deal with on the enterprise side. So it's one step closer to the enterprise business. Our next question comes from the line of Ramiel Khouria from Saab. Could you please just provide some flavor on your plans for the Enterprise Solutions offering? I know it's early days, but I mean your analysis so far, what are you going to do with the contact center capabilities here? Yes. It's very interesting because messaging becomes conversational, as we had on one of the slides and repeated many times. So pretty much any company enterprise we have, when users start responding to all of the outbound messages that comes out becomes a conversation an advertiser and the consumer. And that may start in the messaging format in our world. But in and then you may use the chat layer or the functionality to automate the responses of that conversation to some extent. But to some extent, you also need to we're humans, right? So at some point, you need human interaction. And there's only a if that's 30%, 50% or 17% of the users, that depends on the use case. You need to hand that over to human agents. And that's where the kind of the interaction in between the messaging and automated kind of consumer communication and the contact center industry is. And that's where the line or demarcation is, and that's where we will engage. So you would expect us to or I'd say the chat line functionality, what can we do with that in the contact center industry? And you should expect that contact center industry to use our messaging routes on omnichannel fashion. And you should expect us to explore the interface there. So how can we do something conversations with consumers? That's the kind of the overall and there we need to learn because this is new for us. It's also very interesting because it's an industry that progressively is moving closer and closer to the CPaaS industry. And there, we have to set our strategy together with this business unit as we learn with it. Any more questions on that? Or I understand that's a little bit hard to understand, but it's No, that's very good. That's very good. But I mean, the go to market is quite different here. So given what you're saying is your intention is initially to sort of explore options here before taking decisions on sort of investing in the go to market organization for this vertical specifically? Is that sort of the way we should read it? True. You should see this as a separate business unit within SAP, and it becomes separate with us as well. But there is a growing increase of integration in between the contact center space and the messaging space and the CPaa space. Space. So there's large degrees of overlap, and we will explore those overlaps before we set the clear strategy on exactly how do we go forward here. Let me just take my final question, if that's okay, and I won't pass it to you for today. But perhaps just some high levels of flavor on the competitive environment in the APAC region. I mean, we know who your competitors are in the U. S, but anything in the APAC region would be great. Yes. First, relating this transaction to APAC, I mean, we both have volumes and customers on the APAC region. This is, however, mainly a if you look at staff and the transactions, mainly U. S. And Europe. So this is more towards what we have, and this is not one of the major players in the APAC region, even though it obviously strengthens our footprint greatly. Then looking at APAC, it's a very large region. It is the most popular region in the world. And there are significant players in that region in many different areas. I mean India is a market of its own with a set of large players. China is a market of its own with a set of very large players. And then you have all the countries apart from that with significant regional plays as well. So that's another region, which is just the start or maybe the largest region in the world in this space. So obviously, there is growth opportunities and large competitors in that space in a big way. Should we consider this acquisition as some sort of a green field entry into those markets? I mean, given that you presumably increase your direct sales presence in mainly India here? Or could there be more M and A in the pipe if you want to update that more forcefully, if you will? I know it's a tricky question. Well, it's a obviously, we don't comment on future possible transactions. But you're correct. This is more of a greenfield entry or it's more of doubling our own greenfield entry. I mean, we have done the greenfield entry there. We have a set of people in Asia. And as of Peter, again, it's correct to have done the same. So say that this is more greenfield or doubling our own greenfield entry into the APAC region, yes. So we become a larger player, but we're by far one of the largest players in APAC by this transaction even though we're doubling our size. Remember, this is a very, very large market. So should we decide to enter APAC more forcefully? Yes. Then we can invest value the other transactions of players who are more local to that market and larger by market share in the markets in several different regions. Thank you very much, Hoskari. Thank you. Our next question comes from the line of Daniel Juberg from Andos Bank. Thank you. And my two final questions, if I may, would be first, you sounded positive on the regulatory approval process. Can you comment some more on that, which markets because it was several jurisdictions? And also in which market will the joint company be and have the largest market share post merger? And also if you can comment if you heard anything from STI on the COVID-nineteen impact since they have the enterprise 1500 enterprise customers in terms of volume, they saw in March if compared that with you? Yes. Thomas on Russia, maybe you have a look at the regulatory approval. Yes. I think we refrain from going into any details. We're assessing the the exact list of countries where we will file for regulatory approval, and I don't think we'll comment anymore at this stage. Fair enough. And on the COVID-nineteen, we have been obviously in these times, we are reviewing the transaction volumes and how our businesses perform. It is obviously a little bit hard from the outside to assess the business in full, but based on the information we have been provided with, they have a similar impact to what we have. Obviously, it is not good, but it is in the short term, we have not seen major impacts based on the information we have been provided so far. So I think it's similar to what we see in ourselves and what we see in other players in the market. And on the carrier messaging side, it has been a little bit positively impacted due to, I mean, the general trends that I think you read in the papers that people communicate more via the telecom networks in these times. Perfect. Thank you. Stay safe and healthy and good luck. Same to you. Thank you. Our last question comes from the line of Brad Lubinovich from Carnegie Investments. Please ask your question. Your line is now open. Thank you. I was wondering if you could say something on e mail perhaps. And I know you can offer this through partnerships, but you rarely or never even speak of it. But it seems that SDI does have capability. So maybe some thoughts on this channel. Yes. In general, I mean, we're a customer engagement company, and e mail is something that is requested by Enterprises. So it is not the core reason for making the deal, but it's one of the technologies that are interesting to get and one of the getting the experience from that area is very interesting. And therefore, it can be added and then the knowledge can be added to our overall offering. But we need to just like with the contact center industry, we need to review that more and understand that portion more of the business before we can give any more information. But in general, this is about customer engagement and customer communication and e mail and in app and all these others. That's just more channels to which enterprises can use to engage their customers. Okay. Super. And I have just two more. One coming back to customer retention. And you mentioned that one of the biggest dealer channel here is the customers, and there is some overlap on the technology side. But is there any customer overlap seeing as SAP has been around for quite some time? And also about retention on the management within SDI, will they stay on board here once this is finalized? So on the customer side, of course, there are overlaps. These are large enterprises typically have multiple vendors, and that's an active strategy on the customer part. And therefore, being 2 major players in the industry, there is going to be overlaps. So yes, is the short answer. Is it major? Maybe not. But yes, there will be overlaps. On the entire organization, I don't want to single out any different group, but on the Asurion organization, we will, of course, review and see who will what are the roles in the new joint company. We have a philosophy of from the day 1 that a company joins, so we're just as much part of the of Finch as anybody who's been there for a long time. And we are a strict meritocracy. So we're just looking at how can we grow our business to supply our customers with the best possible service in the best possible way. That's our approach. And then we try to do just that. And as you can imagine, in this stage, we're going from a 700 person company and with WAVI and SDI, we're adding some 500 people. There is a lot of growth, and we need to upscale our we need to upscale our own organizational structure and rethink that and make sure we follow this process, which we have been planning, of course. So therefore, it's good to have a lot of new colleagues and a lot of new competence that you can utilize in various different ways. Exactly how that plays out, we need to speak to the people and get to know the people before we can answer that question. Thank you very much, everyone, for dialing in to this conference call and for your continued interest in Cinch. If you have any follow-up questions, feel free to reach out by phone or e mail. And with those remarks, I'll hand over to Oscar for a few closing words. Thank you, Thomas. Needless to say, we think this is a very interesting and good addition to our company. Otherwise, we wouldn't do it. We think, like I said, I mean, the customer base, the operations, the people and the financial attractiveness, the financial attractiveness in this deal, I think it makes it this it's one of the steps and one of the big stepping stones on the way for us to reach our goals. And therefore, we're very, very happy to have agreed with SAP to make these transactions around SAP Digital Intellect. That said, thank you. Thank you for your interest and hope you stay safe.