Welcome to the Sinch AB Investor Update. Throughout the call, all participants will be in listen-only mode, so there's no need to mute your own individual lines, and afterwards, there'll be a question and answer session. Just to remind you, this call is being recorded. I'll now hand the call to Thomas Heath. Please begin your meeting.
Thank you, operator. Good morning, everyone, welcome to this analyst and investor call with Sinch AB about the acquisition of ACL Mobile. My name is Thomas Heath. I'm Chief Strategy Officer and Head of Investor Relations. With me on this call today is our CEO, Oscar Werner, and our CFO, Roshan Saldanha. With those opening remarks, I'll hand the word over to Oscar.
Thank you, Thomas. We're very happy to announce the acquisition of ACL Mobile today. In this call, we will give you a little background and have questions and answers, of course. If we can move to slide two in the presentation, please, operator. This is Sinch. Many of you have seen this slide before. Revenue for 12 months of SEK 5.6 billion and adjusted EBITDA of SEK 646 million. Around about 700, 800 people present in 33 countries.
We do customer engagement through mobile technology, and we do 40 billion engagements per year. I ask you to remember that figure. It's interesting in the context of what we're doing here. We do cloud communications squarely for messaging, delivering messages for enterprises when they want to communicate to their customers. Voice services, connecting voice calls or video services to a much more extent.
If you want to do a video service to, for example, a doctor service, doctor online service or something like that. We serve eight out of 10 of the largest U.S. tech companies. This is a growing global multi-billion dollar market. That's also interesting in this context. The market is truly global. In any country that you go, you will see enterprises using these services. If you have a goal to be a global player, you need to be present in the largest economies of the world.
That's one of the reasons to this being interesting. We have 100% consumer penetration, so pretty much any consumer with a mobile phone is a user of these type of services. As you know, we all call the ride-hailing service, or we all have been receiving a text message from our banks.
That's also one of the reasons here. We have global customers with demand to deliver into India, and therefore, it's interesting to expand into that market, apart from the market being interesting in itself. All right, operator, let's go on to the next slide, please. Slide three in the presentation.
To put it in context, the gross profit, adjusted EBITDA, and the synergies of the transactions we've done, as you can see, we have had a strong growth organically, but also these latest transactions, they are putting us in a completely different level. Both on the gross profit and the adjusted EBITDA side, it is obviously very strong to be able to make these transactions and acquiring companies that are strong, highly profitable in these times.
Given the context, you can see both Wavy, SDI, and ACL impact on both the gross profit and adjusted EBITDA. We believe all of those transactions will put us in a much stronger position to be a leading player globally in the CPaaS market. Thank you. Operator, can you please go to the next slide, please?
The markets in general, if we look at slide four, messaging being our core segment. We do not show voice and video on this segment, but messaging alone is a SEK 17 billion market, and estimates vary, actually between SEK 15 billion and SEK 50 billion market. We choose to take the lower end of that figure and believe in that. That is what most corresponds to our own figure of the market.
As you can see, if you just count the size there and count our revenue and the other main top competitors in this market, it is a very fragmented market. Obviously, it is a fragmented market because it is present in all countries. That is also why if you want to be a global player in the long run, you will need to be present in the largest economies, which this deal represents.
Then on the messaging side, you have the main business on SMS, which is growing at solid rates. You also have a very high growth part of the market, which is more on the WhatsApp, RCS, WeChat, KakaoTalk, where you have the new messaging channels, which is growing very fast.
On the CPaaS side, you have a fast-growing SaaS part of the business where you add SaaS value add on top of the actual messaging or voice or video transactions. That part, according to all researchers, growing at a fast pace. Interesting about this transaction is India is WhatsApp, and then, I mean WhatsApp for business, one of the top three markets, probably one of the top two, if not the largest market for WhatsApp in business messages, so business services.
That's also an interesting market from an innovation perspective. This comes both to the left and the right-hand part of this market because WhatsApp as a channel is large, but that also means that the opportunities to create value-added services on top is large.
Here you can truly see that Brazil and India is leading, and being highly present in those two markets will drive your innovation. You can see the emerging markets are actually driving the innovation into the more developed world in this regard. Operator, can we go to slide number five, please?
This is the playbook for profitable growth that we laid out, and based on two pillars, partly being strong in the connectivity business, and then in the software as a service business. The connectivity business being delivering messages or terminating voice calls or terminating video calls. Sorry. Software as a service business being the software value on top.
This transaction is representing us being stronger in the connectivity business, and it is truly making us grow, above all, making us grow in a profitable manner, which is something that we are very proud of to be able to do. All right. Operator, let's go to slide six, please.
We have set a goal to do M&A in two categories to meet our strategic objectives. One is transactions in the scale and profitability area, and the other one is in the technology and go-to-market area. Scale and profitability being typically larger, high-end companies, such as ACL. ACL fits squarely into scale and profitability. It's around about 300 people. It's highly profitable. It's present in a large market.
It's been around for a long time. The technology and go-to-market area is where we typically make small transactions for a component of technology and a go-to-market, which we think is better to acquire than to buy. We acquire that, and we typically then scale those type of transactions globally.
An example here could be like myElefant or Chatlayer or those type of transactions. Larger companies are, of course, always a little bit in both, and that is true for ACL as well. The largest alliance shares end up in the scale and profitability category. Operator, can we go to slide seven, please. Here you see a range of the latest acquisitions we made and how we see them fitting in the big context.
As always, the larger transactions are always a little bit on both ends, ACL primarily sit in the scale and profitability category. Operator, can we go to slide eight, please. ACL, it's a leading cloud communications provider in India and Southeast Asia, and one of the top three players in India. It has a very strong customer base with a leading position in banking and finance, very solid, strong customer base.
We expand our customer base and diversify our revenues and our gross profit to a whole range of various very solid enterprises. It has a significant scale with 47 billion business messages handled in the past 12 months. If you remember the figure that Sinch at being 40 billion, you can see this transaction being very large. Sinch with the latest acquisitions, is actually doing 60 billion.
In total, it would be 110 billion messages with all the acquisitions we have made now. As you can see, the 47 billion is very large, and that is driven by a couple of factors. Partly, it is just you can see the power of being in one of these very large economies. It's just a lot of population in India, and therefore, the number of messages goes up.
Also the relative, the number of messages or transactions in the cloud communication space per capita in India is very high compared to most other countries. Obviously, both of those factors makes it an interesting market for us to be in. ACL has 288 employees in India, UAE, and Malaysia, but obviously the lion's share being in India. The rationale, we think, is very straightforward here.
It's a significant scale in the world's second-largest mobile market with 1.3 billion population. We believe this is one of the markets where most innovation and most type of services in the mobile industries is happening. We believe that if you should be a global leader in this market, in cloud communication space, you need to be in the population centers of the world, and India obviously being one of them.
The other very important is ACL has more than 500 large enterprise customers, including the majority of India's privately owned banks. Very strong customer base that we can add on to our own customer base, and that is diversifying our gross profit and our profits. Third one being it's a highly accretive deal, fits in the scale and profitability category.
The financials of the deals is very solid. The fourth one, also very important, is that it expands our Super Network, and gives us direct connections in India, and a competitive cost structure for further expansion into Asia. This expansion of the Super Network is very important to our largest customers.
As you know, we are a supplier to many of the world's largest customers, and they have a very strong demand to deliver into India. We see both getting a strong base in India of Indian enterprises, but also being able to offer a strong service to the world's largest customers, who obviously also see India as a large and very important market. For us, this fits very well with our strategic agenda.
We did set out early in the year to say, "All right, if we want to be a global player, what are the regions we want to be in?" Latin America being one of them that we wanted to enter, and then India being the second. We can now see we're a leader in U.S., Europe, Latin America, and India. I think that makes us a truly global player, if not the most global player in this industry on a global basis.
On the integration side here, needless to say, we have been very active on the M&A front, and we need to see integration. We need to take great care and be very thoughtful when we do this, and then we have thought great lengths about, do we think that we have the capacity to make this type of transactions?
Do we think we have the capacity to integrate it? We believe the answer to that is yes. We are, in this case, maintaining the leadership with the ACL Founder and Chief Executive Officer, Sanjay Goyal, and joining Sinch. We're going to run and operate this for the future as a unit.
The good things when you acquire these type of larger companies is, if the company's been around for many years, it is stable, it has stable, long-standing customers, it has a management team, and we will keep a lot of these structures intact in this deal in order to have a very strong base in India. As I said before, we're going to use ACL's direct operations and connections in India, UAE, Malaysia for all our customers.
On the synergy of the assessment, we will get back with a more detailed estimate after the ACL and SDI transactions have closed. The reason for that is straightforward. It is that SDI and ACL both run their operations from south of India. We need to look through the combination of these two and then get back at a later stage with the full synergies.
We think that's prudent to do in this stage, not to overestimate the synergies we have and also not to underestimate them. On the financial point, the side, we do pay a total enterprise value of maybe Roshan, if you want to take this part of the presentation, and then I'll take the next two slides here. If you want to comment this and give a little bit more detail on the financial side.
Yeah, I am happy to step in, Oscar. Thank you. Again, good morning, everybody. Very excited to announce the acquisition of ACL Mobile this morning in India. Just on the financials, very quickly. Sinch is agreeing to pay a total enterprise value of INR 5 billion, 350 million, which equates to SEK 655 million. It should say Indian rupees there. ACL has revenues of just under INR 5 billion during the 12 months ended March 2020.
Fiscal year in India ends in March every year. They have a gross profit of INR 1 billion, 91 million and an adjusted EBITDA of INR 480 million. These numbers correspond at current exchange rates to revenues of INR 607 million, gross profit of SEK 134 million, and EBITDA of SEK 59 million. Their like-to-like gross profit growth is 13% in the 12 months ending March 2020.
We expect this transaction to close, the first closing coming in Q3 of 2020, where we are acquiring 82% of the company. We have a second closing coming more towards the end of the year after December 1st, 2020, where we acquire the remaining 18%. The enterprise value and the purchase consideration will be paid in proportionate parts to the acquisition of shares. With that, I'll leave back to you, Oscar.
Okay. Thank you, Roshan. We go to the next slide. Slide nine, please, operator. India being the second-largest mobile market in the world with a population exceeding 1.3 billion, 1.2 billion mobile subscribers and around about a 50% smartphone penetration. Here we still have a lot of feature phones, and projecting a high growth going forward on smartphone penetration.
It has the world's highest data usage per smartphone at 9.8 GB per month. Here we see a lot of innovation happening in the mobile ecosystem and India is truly mobile first country. Being a cloud communications company in mobile, there's nothing as important, or there's a lot of things that are important, but one of the key things is following the innovation trends in the market. India being a very good example there.
It is a rapidly digitizing economy, second only to Indonesia in the world, if you look at a McKinsey report that you can see down in the notes. It's the world's largest WhatsApp market, with over 400 million users in July 2019. You can see, it's both a very large, and what we think is very important with our market, India, it's a very large here and now market where we can make solid profits as of today, but it's also a very important market going future for all the innovation that is going on in the market.
Being present in both of these aspects is very important to us. Going on to slide 10, please, operator. ACL Mobile is founded in 2000. It's a cloud communication platforms for real-time communications over SMS, WhatsApp, IP messaging, and voice.
More than 500 enterprise customers, as we said before, including a majority of India's private-owned banks. 47 billion messages sent on behalf of businesses, 288 employees. As you can see in the customer segments, in a very large and well penetrated in banking and also in insurance. As you can understand here, a couple of things, a very solid and financially sound customer base.
Also, there's obviously a lot of other segments as well and a lot of growth opportunities, many different segments in India, as you can see from this slide. If you can deliver 47 billion messages in this area, there's obviously a lot of messages in other areas as well. Very important to say, there's also a platform here called Axiom, that is a platform for enabling banks and enterprises to handle their own communication needs.
It's a platform that is offered to banks, both to route traffic to ACL, but also to route traffic to other suppliers. They're basically both doing what we're doing, but also enabling enterprises to handle their messaging needs and handle a set of different suppliers, which we think is good. It's used by over 30 banks and financial institutions. Meets all the needs from financial institutions in India and all the requirements, especially with regard to banking transactions.
Roughly 40% of ACL's total messaging volumes comes from banks that are using Axiom as a routing engine, and then sending part of the traffic to ACL. Has a lot of flexible deployment options, both on premise and cloud, and it's secure, flexible, and reliable. Operator, if you go to slide 11, please.
Expanding the Super Network, being very important for our largest customers globally. This adds direct connections to all mobile operators in India, UAE, and Malaysia, as you see below. This is important for securing end-to-end control and end-to-end quality.
As you can imagine, we can go to large customers in the West Coast of the U.S. and say, we can control the entire chain from Silicon Valley all the way down to the operator in India. Very few, if any other player can do that. This is important from a quality perspective to not have to depend on middlemen. We can ensure the quality end-to-end all the way from the globe to the carrier. That's a very important feature if you want to provide a high-quality service.
High quality can be both end-to-end security, it can be speed and throughput, it can be improved redundancy or broader feature support, or it can be all of the above. That's typically, we have seen a very powerful way to grow with our largest customers of being able to provide those types of services. All right. Operator, if you go to the next slide, please. Roshan, if you can cover the slide.
Yeah. Thank you, Oscar, for taking us through why this is such a great deal for Sinch. Just commenting on the financial leverage then. As you know, Sinch has a financial target to maintain net debt over adjusted EBITDA at less than 2.5x over time. I would stress the over time here. As well, when we look at sort of the pro forma calculation, including the last 12 months of adjusted EBITDA for the acquired entities that we have announced and that we have closed.
As at Q1 2020 reported, we had a positive cash position of one. When including the TWW and myElefant portions, we will come to 0.9. When including also in addition Chatlayer, which we closed in April just after Q1 was closed, we would come down to a positive cash position of 0.8.
If we then on a pro forma basis also add in SDI and Wavy, which we expect to close during the second half of 2020, we would have a leverage position of 2.7. Then finally, including the adjusted EBITDA and the full consideration for the purchase of ACL, we would then end up at a leverage of 3.2. This pro forma leverage of 3.2 is well within set by our bank and other bond covenants.
[audio distortion] We expect, of course, that since these closings are taking place during the course of the second quarter 2020, we expect leverage to decline compared to these two figures as EBITDA grows and as cash is generated from the ratios. Operator, please turn to the next page. Page 13. This is just an overview of the integration process.
Just as a overall comment, of course, we have a deal scouting process, and when we have come sufficiently forward in the deal scouting process, we are performing a very comprehensive due diligence covering commercial, operational, financial, tax, HR, legal, and integrity areas. Post that, in commercial negotiations, of course, we have signing and announcement on a day such as this.
Until closing, usually due to regulatory restrictions, we are only allowed to plan integration. Of course, after closing of the transactions, the actual integration work begins. When it comes to the integration work that we are doing, if you look to the already closed transactions, such as TWW and myElefant, which were announced during October 2019, and Chatlayer, which was closed in April 2020, we are progressing as per plan.
In the case of TWW, we have a platform integration ongoing, and in myElefant, we are targeting a U.S. launch this year. In the case of Chatlayer, we are performing deeper integration. When it comes to the transactions that we have announced but not yet closed, Wavy, SAP Digital Interconnect or SDI, and from today then ACL.
We have regulatory processes ongoing in the case of Wavy and SDI, as well as integration planning together with the management for those companies as applicable under regulatory rules and conditions. In the case of ACL, we will be performing further synergy assessments as well, because we see benefits of having ACL and also that SDI has some presence in India then.
Turning to the next page 14, just to remind you of the message volumes and Oscar mentioned earlier that combining all of the transaction volumes that we have, including the signed but not yet closed transactions on a last 12-month basis, we would have more than 110 billion transactions. The acquisitions of TWW and myElefant, of course, last year in October, added significant volumes, where you see an increase there in the end of 2019.
In the beginning of 2020 or specifically in March 2020, we had a one-time spike, as we commented on in our Q1 report commentary. We had seen already in April, as we said at that time, that spike had gone away and that traffic volumes had started to normalize. I think you just want to reiterate that message, that the spike was a one-time spike in the end of March 2020.
We have growth from existing customers, of course, new customers and new use cases, and that continues. Our normalized growth trend continues, but that spike was a one-time event. In addition, I think just to reiterate what we said in the Q1 report, our voice and video segment, where we have a significant amount of traffic coming from ride-hailing business, has been affected by lockdown restrictions, and we have seen volumes drop.
In Q1, that was a couple of weeks, but during the second quarter, of course, it is affecting the entire quarter, at least until now. Finally, when it comes to messaging volumes, as we said again in the Q1 report, we have seen some segments being negatively affected, whereas other segments then increasing and compensating for that negative impact.
Again, messaging volumes continue to trend more in line with normal behavior, excluding the spike in Q1. Turning to the next page, please, operator, page 15, our financial targets, which are adjusted EBITDA per share to grow at 20% per year and net debt to remain at less than 2.5x adjusted EBITDA over time.
We grew adjusted EBITDA per share at 52%, measured on a rolling 12-month basis and net debt, we had a positive cash position of one at the end of Q1, and as I said, pro forma net debt would be at 3.2x with the acquisitions of Wavy, SDI, and ACL. I would like to hand back over to you, Oscar, for any concluding remarks.
Thank you, Roshan. The concluding remarks here for me is India being one of the largest markets in the world and most innovative mobile markets is very key to be in, both from a local perspective, but also from being able to successfully serve the largest brands on the planet, and that is very clear on the strategic intent and on what we're doing here and the need.
We think it's very strong that we can now say that we're one of the leaders in U.S., Europe, Latin America and India. That makes us truly global, which is very important in this market. That's number one. I think the strategic rationale for making this transaction is, to us, very strong and very straightforward. The other part, which I'm sure you all think about, right? Is it right to do it now?
Can we handle the integration? The answer to that is, one, you cannot always choose the timing of M&A transactions, as you know. Sometimes you have to choose when do you do it or do you not do it at all. We think this is one of the best markets to be in and the most high quality supplier or player in this market, and therefore we think the transaction is good.
Obviously, then on the integration front, we analyze that in a very good manner, and we do think we have the capacity to do it. I should also note that it's a stable long-term company that has operated on its own for a long time, and therefore, it's not like we need to do anything immediately. This is a stable company that has been running for a long time and will continue.
Also a very important point here is these companies we know for a long time. It's not like we're super new to this market or to the Indian market. We have used almost all those suppliers in India for a long time, and we have evaluated them over many years of sending traffic via them.
We know the people, and we know the good players, and we know what's happening in there since we obviously have traffic and so on today. Therefore, many of these companies that we acquired is known entities to us, and it's people that we know, and it's companies that we know, and that obviously takes down the risk of these type of transactions a lot.
That's very important to understand that it's almost 20 years of experience in a market that we're playing out in a short period of time here to say, all right, we know all these players. We're taking all our experience then extending it out to making a set of acquisitions in a rapid pace in order to get where we want it. This has a long background. With that said, I want to leave over to Thomas and then for Q&A.
Thank you, Oscar and operator. Are there any questions on the line?
Thank you. Ladies and gentlemen, if you wish to ask a question, please dial zero one on your telephone keypads now. Our first question comes from the line of Daniel Djurberg of Handelsbanken. Please go ahead, your line is open.
Thank you so much for taking my question. Congratulations on another interesting acquisition. You for sure keep us analysts quite busy. That is positive. My question would be first, if you can comment a little bit on the growth trend in gross profit. It's said to be a 30% growth in 12 months. Is this trending upward or flat-ish, or is it in line with the market? Is it big differences between ACL Mobile versus the Axiom platform?
Roshan can take that.
Yeah, I can take the growth trend. Thanks, Daniel. When it comes to the growth outlook, I think the short-term growth outlook in the case of ACL, there is a corona pandemic ongoing in the world. India, of course, has had quite significant lockdown restrictions here beginning in March, and I think the whole month of April and the whole month of May, and only partly lifted at least now in June.
I think that's important to remember how that develops during the coming weeks and months will affect the short-term growth outlook. When it comes to the long-term growth outlook for the Indian market as a whole and for ACL, we are quite positive to that, and we aim, of course, to improve that. I think for ACL as well, compared to historical performance, I think there are several reasons to do that.
One is, of course, the combination of Sinch and ACL, combining our strong global product and global presence of customers as well as the local strengths of ACL in India, as well as how we can leverage on that position in our emerging market strategy. I think just to point to two of the reasons, I think Oscar went into more detail in his presentation and comments. We are quite positive that long-term growth outlook is higher than the number historically.
Okay. Another question, if I may, would be also on Axiom. Is it already cloud-enabled or do you see a need to work on R&D to cloudify this to get good enough cost and revenue leverage? If you consider it a positive thing or a risk that it is generating some 40% of the total ACL messaging volumes understood?
This is Oscar, I can take that. We see that as an opportunity definitely more than a risk. We see this very strong point to both be able to supply what we do, but also enabling enterprises and especially banks to handle the messaging needs. I think it's a strong point and now it's an opportunity, not actually risk, because you're basically doing an additional service to them. If it's cloud-enabled, it's high scale.
This is one of the very interesting dynamics with this type of transaction is this company is handling 47 billion messages at a fraction of the cost that we are handling our 40 billion messaging messages online. Is it scalable? Is it cloud-enabled? All of those questions are, yes.
It's also giving us a low-cost base. In Sinch, we're not as cost efficient in handling the messages as ACL or far from. We think this, giving Sinch this very strong ability to have the very high volume, the amount of messages to low cost, it's going to be very important going forward. As in any highly competitive market, that is important. The answer is yes to your questions, but we also see that as a very strong strategic advantage going forward.
Perfect. My very final, fourth question would be if there are any news on the regulatory approval of SDI and Wavy as of yet?
I can take it, if you like. Yeah.
Yeah.
Yeah. Daniel, we are, of course, both Wavy and SDI involved a number of closing conditions, among other things, a carve-out, as well as regulatory approval in a number of different markets. At this point in time, the only thing we can say is that we are progressing in those processes, and we have close dialogue with the different regulators involved. There's no other update to give other than that we are still confident that we will close this in the second half of 2020 as we have previously announced.
Perfect. Thank you so much. Good luck.
Thank you. Our next question comes from the line of Pavel Svinenyi of Carnegie. Please go ahead. Your line is open.
Thank you, operator. Good morning, guys. A couple of follow-ups, and I think one obvious is, of course, on the integration backlog here, and I think your comment was very good there, Oscar. If you can maybe talk briefly on how these processes differ from another. I can assume that there's quite a big difference between integrating SDI, and ACL, and to me, ACL seems more similar maybe to TWW in terms of integration process.
You are correct. Well spotted. ACL and TWW are similar in one sense, and that it's a kind of straightforward messaging companies. SDI has a set of other units as well. They're more similar. The big difference, obviously, ACL being bigger, but also the low-cost nature and very high volume nature of ACL is different. TWW is there as well, but ACL takes it to a different level. That's true.
If you look at these, if you look at the ones we've done, myElefant and Chatlayer are squarely in one category there. We're making them own one piece of a global component. We have myElefant and Chatlayer are their tech teams. They ask, "You own this component globally in cloud." That's possible to do, right? We just connect it, we just upload it onto Amazon, and we connect the different units.
R&D-wise, they own one unit. We're doing that integration and making sure the lines and the interfaces to the other R&D teams are clear, and then they can own the global component, and they can increase the space there. We see that going forward on a very positive note. We're right now putting together myElefant and the Wavy team.
We're really seeing that going forward. The transactions on TWW side, it's ongoing, and we're deploying our messaging platform down in Brazil and Latin America. We see that ongoing in a positive manner with a very positive collaboration with TWW. We see those three are kind of underway, and we also see both on the myElefant, TWW, and Chatlayer side, we have great demands from our existing teams and a lot of cross-sell.
Actually, a lot of our deals in Europe are now containing myElefant technology. A large portion of the actual customers are containing these type of components already in there. We see also on the revenue front. On the way the SLT and ACL, obviously, we can do integration planning after integration execution after the deal closes.
We see the planning ongoing with both SLT on an earlier stage and Wavy as well. We're laying out the plans, and we see how this can fit in, and it's very seeing these teams come in, and then we can see you can do the integration and then how much you can actually lose onto forward-looking R&D and forward-looking services and forward-looking sales.
It becomes very powerful when in the middle and seeing the opportunity here, you can see the power of actually doing this and coming out on the other end of the integration. I'm generally very positive. I should also say the positive thing, obviously, it's a lot of work, but the positive things of doing a number of transactions like this is you can really start to plan for it.
We know we're going to have a lot of integration work in the coming couple of years here, and that makes it possible for us to plan for and have a professional team really focusing on it. If you do it once as intrusive, it's almost harder because you cannot plan for it, you cannot resource it.
Here, there's so much synergies and so much opportunity, we can actually plan for it in long term, and we can resource it, which in one way is harder, of course, but in one way, it's almost easier. Anything you do repetitively obviously becomes, you can create an integration machine in a much better way. All right?
All right. Thank you. That is very encouraging. In terms of synergies here, you are not targeting any synergies, and I know ACL seems to run quite effectively based on the margin. I assume that most synergies here will come from the revenue side in the future, and you did mention now in some forward-looking R&D, but is it safe to assume that there should be some revenue synergies here? Maybe also what degree of your customers have traffic needs in India? If you can compare these a bit.
Revenue synergies, definitely. We typically don't state those, as you know. Definitely, we see them in TWW. We see them in Wavy, and we see them in Chatlayer. I would say all of our largest customers, the big tech customers, I would say 100% have needs in India. There's not a global brand who have no customers in India, particularly on global. On that side, yes.
There's definitely opportunities. It's on routing, obviously, using the routes in ACL, and they have a lower cost base in India than we do. Our existing traffic, we can port over and get more cost efficient than we can today, and therefore, you have synergies on that side. On the cost side, you're correct.
When you go into here and you have a very low cost base, you need to be a little bit careful about the synergies on the OpEx side, and also because both ACL and SDI have opportunities there. You're correct, a large portion being there, and to be conservative, we don't want to state too much on the OpEx side due to these couple of factors before we have got themselves into the deal.
In the long run, we see ACL as a platform for having a lower cost base, which we think is very powerful and also very strategic. If you take a play that little bit longer, we do think that it's very powerful in making us more competitive in general, which you can obviously see as synergies and something else.
We see that, and we think that will have a large impact for us going forward.
All right. Super. Thank you. Just one final follow-up there. You did mention the U.S. big tech, and I think you mentioned before that having access to Latin America and India is very important to your current customers. You see very strong demand for delivery in India.
At the same time, your customers, like the U.S. big tech guys, they've been driving organic growth in the past quarters. You also mentioned that there is significant runway left for these customers with regards to traffic. I'm trying just to understand the hurdles here that they see. Could this enable the likes of Microsoft, Salesforce, et cetera, to reallocate more traffic to Sinch now?
I can't say what they're going to do, but that's our goal, of course, yes. All these companies have significant traffic into India. It's not a surprise. This is a big market, right? All of these customers are global. They have significant traffic into India. They typically don't send it via Sinch today, and some do, but a lot of them don't, because they may have local relations with companies such as ACL or others.
It's just such a big market, right? This is a large portion of our population, and they can do that. They wouldn't do that for Colombia, or they don't even do that for Brazil. For India or China, they may do that because it's so large countries.
Super. Thank you very much, guys.
Thank you.
Thank you. We have one further question in the queue so far. That's from the line of Ramil Koria of SEB. Please go ahead. Your line is open.
Thank you, operator. Morning, everyone. Just a few questions from my side. Also, just to come back to your question on the cost efficiency here. 47 billion transactions, but to be the devil's advocate here, it's round about low teens of your revenues on similar transaction volumes. Is there any monetization issues here, or is it simply so that you have more higher value termination versus ACL?
I'm sorry, could you please ask that question?
They have 47 billion transactions. You have 60, you said, something like that. Let's take LTM numbers. You have 40, and ACL posted 11%, 12% of your revenues on higher transaction volumes. Whilst more cost efficient, sure, but revenue per transaction seems way lower. Is there any sort of reason behind that, or am I simply missing anything here?
It's a very good question. India is a very high volume, low revenue and gross profit transaction market. That is the market structure in India. That's just how it is. That is driven by, there's a lot of regulations that drives a lot of the inflow of financial institutions to have to use text messaging for a lot of their use cases. It's just a very high amount of transactions.
There is even a lower cost per transaction, which both comes from the operator prices to enterprises or to people like us is low, and therefore it drives a lot of transactions. It's also so that, obviously, the huge populations and the economy in India makes the margin per message lower. That's true.
On the other hand, you can see that you can run both companies in a profitable way. If you look at the total metrics of them and their profitability, it's very similar to any other company that you would see in the text message space, us or Wavy or SDI or anything else, it's just high number of transactions to a lower cost per transaction. That's true.
That's also why we think it's for us to enter this type of a low-cost market directly ourselves is very hard. Because as Western company, you may have the wrong cost base. On the other hand, to have that cost base and be able to play that back into our core markets, it's obviously a very large opportunity, and also a way to secure that you don't get low-cost competition that you cannot meet. That's how I would see that.
You're correct. If you look at gross profit per message, it's very low. On the other hand, their profitability in terms of gross profit or EBITDA on total is very similar to any other market. We see that as an opportunity because it enable us to run that type of business model and not the other way around.
Very clear. Thank you. Then just pretty high level on the deal here. What does it really mean that it's run as a unit? How does that differ from how you go about in other markets? Then perhaps as a follow-up to that, you've mentioned several times during the day here that this is a platform business. Should we read it that this is a way to enter other Asian markets greenfield using the superior cost structure that ACL has?
Yeah, I think your two questions are connected in a way. It's good questions. It is, yes, due to the very low-cost structure here, we obviously wanna utilize that, and therefore we wanna run it as a unit and run it. It's not separate or standalone, but in many other transactions, we are just taking, all right, we're taking our core process that we refined in a bit different areas, and we're just implementing them and then unifying it all to one platform, one organization, one operations, et cetera.
Here we need to look much closer since it's actually a lower cost per transaction than we have, which we see as an opportunity. Here we need to then look much, much closer and therefore we want to make sure we keep that low-cost base and therefore run as a unit and take the integration in a longer term.
Your other part of the question, it is correct. We do see this as an opportunity to do a organic entry into market, which we typically before didn't have access to because it's a lower cost base, and we see that as a very strong thing with transactions going forward.
It's very clear. Thank you. I have two more questions, hope that's fine. First off, on the due diligence here. You mentioned that you've been in contact with the company through aggregation, et cetera, previously, and you've had a chance to interact with competitors as well.
From conversation starting to deal closing, how has the due diligence actually been made, given the current situation we're in now? Have you been able to meet the company, and how thorough can you be remotely?
Yeah. We have met this company several times. This process started long before COVID, and there's two parts to the process. One is just like, all right, we've been in India for a long time. We've been meeting the company for years, and that's obviously before COVID. That's one part. If you just take the proper due diligence process, it started before COVID.
Several people from Sinch has been down in India, and met this company several times. Yes, we have met them. Obviously, the latter part here we have had to do remotely for many reasons. Yes, we've met the company several times. We should also mention that both Roshan and Vikram were born in India.
To us, it's also closer as we've been able to have both our CFO and CTO having been born in India, obviously have made it easier for us to assess the India market as such, with two management team members already being born in that country.
It's very clear. A final one from my side here, just looking at the purchase price, 11x EBITDA trailing, you paid 15x percent growth for the entity unit. Looking at the trends since your IPO a few years ago seems to be sloping upwards somewhat. Is that sustainably on these levels, bearing in mind it's a regional player, et cetera, stripping that out, have multiples generally speaking come up or is this a one-off platform transaction?
It's obviously hard to say, but I think this market has been, in general, up-valued a lot. You can see that in our own share price. I don't think the comparative numbers are trending up, not the actual numbers we only looked at, but this is obviously going up. Generally, the market has been up-valued, and I think that that maybe goes for all assets.
On the other hand, it is not to say, even when you look at the multiple individually, it is very hard to say because there's so many things that goes into that number specifically. I think when I look at it, that all of these transactions are very highly accretive to us in any shape or form, and that's why we think they're very financially sound to make.
We obviously evaluate each individual transactions on a standalone basis.
It's very clear. Thank you so much, Oscar.
Thank you.
Thank you. As there are no further questions in the queue at this time, I'll hand back to our speakers for the closing comments.
Thank you everyone for joining the call today. We appreciate your interest and encouragement. Looking forward to speaking to you again the next occasion. Thank you, everyone.