Ladies and gentlemen, thank you for standing by, and welcome to the Sinch interim report, January to March 2020. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question- and- answer session. To ask a question during the session, you will need to press star one on your telephone keypad. For your information, this conference is being recorded today. Now, I would like to hand the conference over to your speaker today, Thomas Heath, Head of Investor Relations and our Chief Strategy Officer. Please go ahead, sir.
Thank you very much, operator. Good morning and welcome everyone to this conference call with Sinch AB to discuss our results for the first quarter Q1 2020. With me today from different locations are our CEO, Oscar Werner, and our CFO, Roshan Saldanha. With those opening remarks, I'll hand the word over to Oscar.
Thank you, Thomas. Welcome everybody to this Q1 report. We're very happy to present a strong quarter this quarter, and we will go through the details in the following slides. If we can have slide two, please. This overview you have seen many times, if you have followed us. We have updated the revenue in the last 12 months to SEK 5.6 billion, and the adjusted EBITDA in the past 12 months to SEK 646 million. We have also grown a little bit in number of people in this quarter to 766. The remainder of the slide is the same. We continue on our main business, of course, to customer engagement through mobile technology and in messaging, voice, and a little bit of video. We're doing 40 billion transactions, 40 billion engagements per year, and we're providing cloud communication services for messaging, voice, and video.
With that said, I think we can go on to the next slide, please. This is now slide number three. We are in unprecedented times, uncharted territory, I think it's hard for any business leader in this time to know exactly how the future will look. In Sinch, we have put a strong program in place in order to have flexibility to handle this. We have put a strong program in place. It's everything from employees working from home, of course. We have also done a lot of customer communications around this. We set up a COVID-19 knowledge center on our website, we have put a strong contingency plan in place where we are considerably more conservative on OpEx investments now in these times. The reason for that is simple. No models can really take in and how do we project for this?
It's obviously harder for any company, and we're of course included in that. In such times, we take a more conservative approach in OpEx and a more conservative approach to leverage in general. We have done, it's good to know, we've also done an anti-smishing or initiative in the U.K. We see in our industry there are companies and competitors using gray routes or routes that are bypassing operators in order to send text messages to consumers which do not send them via operators. We have, together with MEF in the U.K., done an anti-smishing initiative. We have, of course, signed up to this. We're a good player in the industry, and we're happy to see that most of our competitors have signed up, even though all have not done yet, which is surprising to us.
We'll discuss the financial impact of COVID-19 in the later of the presentation. We shall move on to slide four, please. You will have seen that we have completed a direct share issue of SEK 1.5 billion when we announced the acquisition of Wavy on March 26th. We want to extend a thank you because we're incredibly grateful to our owners for being willing to support our strategy in these very uncertain times. A huge thank you to our owners for supporting our strategy there. I also discussed this with our chairman yesterday, we concluded that supportive owners is a true success factors for Sinch, we wanted to personally extend thanks to you as well for your strong support. Go to next slide, please. Slide five. We had a strong growth in Q1.
We had 54% growth in gross profit and 64% growth in EBITDA, this is coming both from organic and M&A-driven activities. Of course, we focus on gross profit and on revenue since we have a large share of pass-through revenue. We're happy to report the track record of profitable growth quarter-over-quarter in the last quarters. If we can go to the next slide six, please. This growth is obviously now to a large extent driven by we're in a positive market. The cloud communications market is a positive market, both in our main segment, messaging, which is a SEK 17 billion market on the A2P SMS market alone. We're now seeing a growing impact on the next-generation messaging, where we have 50%-100%, or in the markets above 100% growth rates in that segment.
We also see a strong growth in the CPaaS segments of the more value-added services on top of the actual connectivity or sending messages or connecting the voice calls. This is a strong market, which is obviously very beneficial for us as one of the market leaders. Have to go to the next slide, please. We have slide seven now. We are focusing on both the connectivity side in voice and video and in messaging, or connecting people to make it possible to transmit messages and place voice call. That's our biggest segment, and we're focused on that. We're also now focused on building a higher value-added Software as a Service, services on top of transmitting the message or connecting the phone call.
We're also adding a large number of services on top, where we believe we can charge more to our customers for higher value-added services. We go to the next slide, please. Slide eight. We have been active on the M&A agenda. We have done two lately. It's Chatlayer, which is on the conversational AI side, and Wavy, which is both on the scale and profitability, and on the technology and go-to-market. The reason for that is simple. They have an innovative business unit who are providing CPaaS services and SaaS services, which we place in the technology and go-to-market sector. They have a large messaging business, which are placed in the scale and profitability area. If we go on to the next slide, we have included the deal rationale in this deck for your reference. We do not intend to go over it here.
We think we have gone over it before, and therefore we'll skip those slides in just a while, but we included them in the presentation for your reference. To remind, on slide 10, what is Chatlayer? Chatlayer is an AI-based service where you can basically understand the human intent of the incoming messages and automate the response. If you think about the connectivity business in messaging or voice, that is actually us submitting the message or connecting the phone call, but there we typically don't do much. In a pure sub-service, you don't do much to the content of the message. That is up to the customer to create. With the Chatlayer, we would, for our customers, of course, automatically interpret what is the intent of the incoming message that is coming from the consumer into the enterprise.
We would tell the enterprise, all right, the intent of the users, or this user's intent is to book a ticket. This user's intent is to know about the insurance claim or something like that. For a company, you can see the difference between the leftmost picture, which is a scripted dialogue, where our customer, in this case represented by KBC Insurance, would need to say to a user, hey, welcome to KBC Insurance. What do you want to talk about? What's your option? They would have a one, two, three, four number of options. The user here is interested in the nearest office, as you see, which is not one of the main options.
The user types that into KBC Insurance. KBC Insurance doesn't understand what the user is saying, so it responds with, you have typed incorrect response, try again. Then the user is typing zero, and you get to the main menu, while the user thinks it takes too long time and therefore give up. You can contrast that to this type of service we can do with Chatlayer technology and AI technology on NLP, which is basically, welcome to KBC Insurance. The user would type in, where's the nearest office? The Chatlayer technology would interpret that and understand what the user means, and therefore ask you what city are you in, if you're not using any location-based services. When the user is answering Liverpool, we understand, or our customer understands the question and can therefore respond by the correct answer.
As you can understand, for a messaging business handling 40 billion transactions, this is a very strong value add to our services. Next slide, please, is the deal rationale of Wavy. We have gone over that in the specific calls for Wavy, I will jump to that as well. If we go to slide 12, please. This is an example of Wavy's innovation business, which is pretty much in line here with the Chatlayer, and that is where they're doing it, the customer care for a company called Ingresso Rápido. Ingresso Rápido is a ticketing sales and event management company, where Ingresso Rápido has a large number of incoming calls to the contact centers, and it's a complex to scale support teams to maintain quality.
Wavy has provided a service to them where 82% of the tickets are answered automatically by a bot, so it doesn't need to go to an agent in the call center. They have 70% satisfied users by the bot answers, a very high satisfaction rate on the answers, since the user is getting the response earlier. We have seen that Ingresso Rápido can have a 45% cost reduction in their call center or contact center due to automating a lot of these incoming requests. This is also a very powerful case, of course, in the innovation business or new tech or CPaaS business of completing. Right. Next slide, please. Going into January to March, we saw gross profit rising 64% to SEK 446.7 million. Adjusted EBITDA was rising, not 82%, but 64%. There's been an error on this slide, to SEK 184.3 million.
Adjusted EBIT excluding acquisition-related amortization to SEK 168.8 million, compared with SEK 102.3 million. Profit after tax was SEK 96.4 million. The difference between profit after tax, it's we had what we're doing, write-downs of the big amortization related of the values coming in in the acquisitions. That's why you have a big difference between the adjusted EBITDA and the profit, which is not really translating to cash flow, of course. Cash flow is much closer to EBITDA. Organic gross profit growth was 42% in local currencies. We see a strong organic gross profit growth in this quarter. We do have a significant local or FX effect in this quarter, which I want to point you to. We obviously have a positive impact of the TWW and myElefant acquisitions.
COVID-19 is causing reduced voice traffic, as we have communicated before, and we can see that in the later part of the presentation. We're also seeing a negative impact in certain segments of marketing due to COVID-19, especially, of course, from the retail segment, you have a negative impact. You have a short-term positive impact on the messaging segment as well, which we didn't fully expect, but that is companies communicating more to their employees and to consumers as a precautionary effect during COVID-19. This is everything actually from healthcare providers. We see major healthcare systems around the globe using our messaging service and then having increased communication. We see one-off effect even from airlines in the early parts of the crisis, their volumes were going up because they have an increased conversation, and then later it's going down.
We're having a positive short-term effect here on COVID-19 as well in March specifically, which we're going to see a little bit when we look at March figures on volumes. Our high scalability means that the EBITDA and adjusted EBITDA grows faster than gross profit, despite us being able to handle getting larger volumes, and you can really see that. Large volumes become a big spike. We don't need to add much OpEx, and it obviously drives a lot of the EBITDA as a result. Next slide 14, please. The key growth drivers in this quarter is continued growth on volume, but also on new use cases, which we're very happy to see with U.S. big tech companies and being able to translate the messaging business into new use cases and new demands with our biggest customers is obviously very strong.
The acquisition of TWW and myElefant, and especially on TWW, when you think about the EBITDA, it's a big driver. We also see the operator business, which coming back to strong profitability this quarter as a result of project completions and large customers having higher volumes. So that's the three main growth drivers in this area. As you see, the voice and video segments we have taken off for this area due to the COVID-19 impact. So despite the strong underlying growth, we see weaker growth in that segment for this quarter. If you go to next slide 15, we have four investment areas, and we adjusted this slide a little bit to add the integration efforts, given the number of M&A transactions we've done.
We're investing in organic growth, of course, so continued investment in platform scalability, supporting existing customers, a new focus on new sales, and broadening our base. It's a big area of investment for us. Operational efficiency, coming to cost efficiency and automation for improved scalability is another big area. New technology is the third, and software for advanced interactive messaging, new channels like WhatsApp and RCS, and RCS as a service for operators. We're also happy to announce in this quarter that we're participating on SMSF for 5G together with Ericsson. Providing operators around the globe with an ability to have SMS in 5G is a strong new development. Integration-wise, we have scaled up our acquisition efforts, as you have seen, and on that comes integration-related OpEx, which if it's true integration-related OpEx, that will go away. We will classify it as extraordinary items.
We are scaling up our integration efforts, of course, on the back of acquisitions. If you go on to slide 16, please. You are seeing on the messaging, if you look at the business segments a little bit, we can look at messaging, our largest segment. You are seeing increased volumes, driven by U.S. tech companies continue to fuel growth. We are seeing also a shift in the enterprise base and in businesses shifting from email to mobile messaging for portions of their customer communication. This is a trend that has been ongoing for the last 20 years, and we see that trend going on. Even being stronger and stronger as we see a strong impact there. myElefant and TWW are included since mid-October 2019, which obviously will impact messaging. We are investing more in next generation messaging, which is obviously impacting more on the OpEx side.
We're seeing revenue, but compared to the larger segment, it's obviously on a small scale. If we go on to slide 17, we see the message volume development in the last quarters here. As you can see, there's a big hike up in Q4 and also a spike up in Q1, and especially in March. The late 2019 is the TWW and myElefant acquisitions, October, November 2019. You can see the jump from the curve there. You see significant volume increase in March 2020, of which part of is likely to be related to COVID-19, and part of being a one-off effect, we believe.
This is billions of messages and thousands of customers, so it's hard for us to know exactly, but we do see a significant spike, especially in March, which we didn't expect, to be honest, on short-term effect, which will not be there going forward, coming from these spikes of increased communication. It's also a growth from existing customers, both new customers and new use cases, and we're very, very happy to report the 60% growth in transactions and a 64% growth in gross profits. Very strong development. We need to monitor this trend going forward, but we were also a little bit surprised on the very strong March number, of course. Going on to the next slide 18. This is gross profit per transaction, and OpEx per transaction, and we're monitoring gross profit as the primary bottom line driver, apart from OpEx, of course.
Gross profit per transactions is declined due to traffic mix, sending this amount of volumes when the mix changes to low gross profit per transaction countries, it has an impact, and we've seen that this quarter. The inclusion of TWW's, high number of transactions, and very good EBITDA, but a lower gross profit per transactions is the market structure in Brazil, and therefore it impacts our total gross profit per transaction, which is planned, and it has a great EBITDA impact, but you should also see that. You also see an OpEx per transaction increase due to the seasonal OpEx pattern. Partly it's, of course, when message volume goes up, then OpEx per transaction goes down, but it's also a seasonal OpEx pattern.
Obviously TWW has an impact here as well due to being a very profitable company, a strong company with low OpEx, which is a high increase in number of messages on total, that the balance then on OpEx per transaction goes down. The difference, which is obviously our profit, it's increasing or being maintained, and we see that in this quarter. Both curves going down is obviously planned, and especially due to the TWW transaction. If you go to the next slide 19, please. We see a stable margin for the messaging. We're measuring messaging EBITDA over gross profit as we measure our scalability, and want to make sure that this line is stable at 45% and even up to 50% in some months.
That means that we're in balance with our gross profit growth and our OpEx investments. We want to keep that balance. That has been what we communicated before, that keeping this line in balance and then continuing to drop almost half of every gross profit dollar down to EBITDA, that's how we steer the company. We've talked about this slide a number of times, so for those of you been on the calls before, you understand it, and we see a stable development on this trend, which is one of our key measures. We believe this is really truly showing the scalability, being able to drop 50% of the gross profit down to EBITDA is a very strong metric for any business. Looking at voice and video, and here you see the COVID-19 impact.
We have said that roughly 50% of our gross profit here is attributable to the ride-hailing segment. As you can all imagine, the ride-hailing segment is down, especially in the lockdown countries. It's also fueled by two segments. It's verification and number masking, and number masking being most to the ride-hailing segments, and verification being most to logins to-big customer. When you get a text message or a voice call, when you log in and want to verify that your number is your number, that's the verification business. That business is obviously still strong. Ride-hailing is driving this drop-down. I want to also highlight that the impact here is only on March, the COVID-19 impact is not the full quarter, it's only on March, but still you see a significant impact.
The total impact, in a quarter where you have a full corona impact, is likely going to be larger than what you see here. This we have communicated before in various communications, I hope this comes as no surprise to you. Looking at next slide 21. On the operator side, we're happy to report a return to profitability on the operator segments. This is fluctuations in results as projects are realized, of course, and we had some previously delayed projects that are successful completed in Q1, there you see the flick they need to be between the quarters. We're also very happy to see the investments or with 5G SMSF together with Ericsson, we're making investments in these quarters on that, which we believe is going to drive good revenue going forward.
We're investing in the RCS as a service to mobile operators, as we see that as a strong potential for the future, which is obviously weighing on OpEx in this quarters as well. With that said, I want to leave over to Roshan Saldanha for a little bit deeper on the Q1 financials. If you show slide number 22, please. Roshan?
Yeah. Hi, good morning. Thank you, Oscar. Good morning to all of you on this call and on the webcast. Please turn to page 23, which shows the income statement. Consolidated net sales grew by 48% in the quarter to SEK 1.6 billion . The growth rate in the quarter was positively affected by the movement of the Swedish krona, primarily against our invoicing currencies of euro, pound, and dollar, and the organic growth in net sales was at 32%. EBIT came in at SEK 119 million , versus SEK 69 million the same quarter last year. Acquisition-related amortization, which does not affect cash flow, was SEK 41 million , with SEK 33 million the last year. This amortization relates mainly to planned amortization of acquired brand customer and operator relationships as well as software, and does not affect cash flow.
Adjusted EBIT, which we believe is the better measure, amounted to SEK 169 million, versus SEK 102 million last year, same quarter. Turning to slide 24, which shows a bridge explaining our underlying gross profit development. A significant part of our revenues are passed on as cost of goods sold to mobile operators. We pay them to send messages and place calls, but the rates can vary greatly between markets, hence, we almost exclusively focus on gross profit when we assess and steer our business. Consolidated gross profit rose by 54% during the quarter to SEK 447 million versus SEK 289 million the last year, out of which foreign exchange contributed around SEK 11 million or 4% of that growth, and acquisitions contributed 15% of that growth.
I think here it's worth to mention also that we see that the more marketing related sort of part of our business is also affected by the pandemic, and that is across markets and across businesses. myElefant being a recent acquisition, has a share of marketing related traffic that is affecting growth, although that effect came only partly in Q1, and will be reflected more in Q2. Looking more at the organic growth, organic growth was 42% in the messaging segment, 18% from a small base in the voice and video segment. As Oscar commented earlier, do consider that the ride-hailing customer segment within voice and video is significantly affected by the lockdown restrictions in the pandemic, and that is only reflected for one month, you could say pretty much this quarter, even less. Whereas in coming quarters, it will be a full quarter effect.
Organic growth in the operator segment was 13%. That can vary from quarter- to- quarter as projects are realized. In messaging, the organic growth is coming from volume growth. Some of it may be short-term. We already see that the spike that we have seen in volumes during March tends to normalize in the first few weeks in April, and we expect that some part of that spike, at least, that we saw in Q1, is not a lasting spike in the medium term. Of course, we also see new use cases, which we are very excited about from our largest customers, and that's contributing growth as well during first quarter. Oscar talked earlier about the investments that we're making for continued growth and highlighted the main areas of growth being driving the organic growth, internal operational efficiency and quality as well as investment in new technology.
Please turn to page 25 to see a summary of the number of resources at Sinch. Our headcount is distributed in many different locations across the globe, but the majority of our resources are in Sweden, with U.S.A., Poland, and U.K. being other locations with significant concentration of resources. We have grown headcount at the company with 50% during the previous 12 months. As stated earlier, we're being cautious going forward and reducing our rate of investments due to the increased economic uncertainty. Obviously, the growth rate in Q1 is reflecting more the new signings of employees that we have done maybe in the weeks or months prior. Hence, the growth in Q1 is still at the same levels as the growth in Q4, at around 40 people per quarter. That might reduce during Q2, depending on what actions we take.
Turning to page 26 then, which is a statement of showing the reconciliation between adjusted EBITDA to cash flow before changes in working capital. Very strong quarter here with 94% development on the conversion of adjusted EBITDA to cash flow before changes in working capital. This is primarily driven, of course, by a combination of one-off effects and refunds of paid taxes, which means that paid taxes are unusually low this quarter compared to what we would normally expect it to be. Turning to page 27 for the full cash flow statement. Cash flow from operating activities was SEK 135 million this quarter. Changes in working capital fluctuates from quarter to quarter because many of our customers maximize their liquidity. We can see a small number of customers requesting additional payment terms, we still don't see that levels that affects our overall working capital development.
Actual customer losses remain low at 0.05%. Cash flow in relation to operating profit is slightly improving over time. The net cash position amounted to SEK 639 million . That is, of course, due to the share issue that we so successfully completed in Q1, thanks to the support from our investors. That is really great to see. Finally, slide 28, which summarizes our financial targets. The financial targets are unchanged for the company from what we have previously stated. We aim to grow adjusted EBITDA per share by 20% per year and maintain net debt below 2.5x adjusted EBITDA over time. Measured on a rolling 12-month basis, we grew adjusted EBITDA per share by 52% in Q1. Net debt to EBITDA was - 1.0%, down from + 1.2% a year ago. With those comments, I'd like to hand over back to Oscar to summarize today's presentation.
Thank you, Roshan. Small comment on the head counting phase. Don't think it was mentioned on the slide, but you obviously have the addition of TWW and myElefant, on Q4 and Q1, give an extra hike in those numbers, and that's why you see the trend break going up in those quarters. Just important to clearly realize. Future growth, we see a strong pipeline with several U.S.-based global tech companies, and this is as I said before, both with turning on traffic from new, but also working deeper and deeper integrations with messaging and other use cases in the ones that we have. Mind you that the five largest U.S. tech companies has the same stock market value as the entire German stock market, and that's only half of the 10, let's just say. All of these are big cloud communication consumers, so it is very large companies.
There are a lot of departments and a lot of opportunity if you continue to do high quality service to them, which we so far have been able to do. We also see, the trend is still there. Enterprise is shifting from mail to messaging. We're also seeing now with the two use cases that we showed, a little bit from the contact center space shifting from voice to messaging. We see strong trends going more to messaging and more to the voice segments that we have in macro, and that's continuing in this quarter. I think it's a strong trend that has been there for the last years. The reason is super simple. If you want to reach somebody fast, time critical, and get a response, then messaging is more effective than email.
It's as simple as that, and I think you can all go to yourself. There are much fewer unread mobile messages in inbox than there are email, and that's what enterprises are seeing, and therefore using these communication channels to consumers. We have a larger field sales organization and strength in marketing. We see increased lead gen from marketing when we up our marketing efforts and improve those, which we're very happy to see. The larger field sales organization is resulting in an increased pipe if compared to 12 months ago. We're working hard, obviously, on driving always a larger broad-based growth in the company. M&A, we have an active M&A agenda in both our categories, scale and profitability and technology go to market. We do have an active agenda.
We think we're very fortunate as a company to be able to make in these times especially, in large M&A transactions, which adds significantly to our profitability at attractive valuations, while also broadening our customer base and diversifying our customer base. I think that's a very attractive position to be in from an M&A-wise in this type of market. That's why we completed it the way we did. We see also continued strength in our content delivery offering. That's a big growth driver, just like increasing quality, increasing reach, et cetera. Increased source value add to investments in software, RCS, OTT, chat apps, et cetera, are our additional growth drivers on top of the top four, and obviously spanning all of the areas there. With that said, I want to thank you for your attention, and I want to leave the floor open for questions.
Thank you. Our first questions come from the line of Ramil Koria. Please ask your question. Your line is open.
Thank you, operator. Morning, Oscar, Roshan, Thomas. A few questions from my side, if I may. Just please help me understand this. Just to square everything that has been said and some numbers provided during the day here. Marketing volumes are down, ride-hailing volumes are down. You are seeing pent-up demand in some sort of customer categories. You mentioned healthcare providers and airlines. That doesn't sound like your average U.S. customer, and U.S. revenues are up 16% quarter-over-quarter. How much of the impact is really COVID-19 related, and isn't some of the COVID-19 related increase in demand also related to digital native businesses seeing a structural change in customer uptake?
That is correct. Could have been clearer on the call. We see two major negatives is the ride-hailing and voice and video, and then certain segments, I should say, marketing, especially retail being one example, there we see negative impact. You see it can be pretty significant on the ride-hailing segments in voice and video, since you only see one month this quarter. We have a structural increase in certain segments like e-tail or some of the cloud communications companies like Login to communications apps. Obviously, that's a structural change, which is likely to continue. That is 100% true.
A structural positive change. You have a temporary positive change, which is more when you see the spikes that we suddenly saw in March, which we didn't expect, of airlines being the clearest example, obviously, suddenly communicating a lot with customers. They're going down. You have healthcare providers or even governments communicating a lot with consumers. This is our unprecedented times. It's very hard for us to know how much of that is actually temporary and how much is structural of that, or even how much is going to continue during COVID. We do believe a portion of it, and a relatively significant portion, is one-off due to the structure of the messaging when you look a little bit more detailed. The simplest example there is obviously airlines. You're 100% right on the structural increase in the communication side as well.
Obviously, it's very hard for us and anyone to judge what's going forward. It's a large number of transactions, and it's unprecedented times, so it's hard. We will have impact, but in general, we're in a good segment, of course.
It's perfectly clear. Just moving on to, or basically tying into COVID-19 impact and on the sales and marketing, some of your peers, their unique selling point has to some extent been online channels, and now with physical meetings being out of the question, have you seen any impact in terms of customer intake, et cetera? You mentioned it in the call, but some flavor on that would be great.
Generally, I think new sales has been harder. Contacting new customers, new leads, new prospects has been harder in these times. The existing relations you have, they typically go on, and especially on the tech side, you see some of the companies just pushing on even harder, and especially the U.S. big techs are pushing very hard. You've seen the recruitment plans of some of them. That's one. We also see companies. You can take airlines, we just got a new big RFP in from a big airline who are just saying, hey, we have less things to do, and we're utilizing this position in order to develop new services. We want to engage with a player here, and therefore sending out an RFP in your area.
While others are saying, hey, we cut all the investments. I think it's very relative to the strategy of the individual company as well. Generally, you can say new sales being tougher, engagement with existing engagements definitely going on and possible to do during these times, since people have a little bit more time on their hands when they're not traveling.
Thank you. Another question on the same topic, perhaps to Roshan this time. Other external costs are up while exhibitions presumably are completely gone, traveling should be down. Is anything in that other external cost line item in this quarter that could be considered exceptional?
No. I think on the other external cost, there's nothing exceptional. I think, in that sense, we have the conferences such as the Mobile World Congress in Barcelona that typically come in Q1, where you could say, since we were committed and a late cancellation, we're obviously carrying some cost for it, but maybe not the full cost of such conferences. There are some minor deviations like that, but on the overall side, I would say that maybe slightly positively affected by the coronavirus effect. In general, no significant one-off items.
Thank you. Another COVID-19 related question before I move on to other questions, a high level one. Do you expect the general consolidation of the market to speed up now with the crisis here? Are you seeing a changed behavior among potential targets, et cetera?
I'd say no significant impacts. Mind you, I think on the scale and profitability side, all of these companies are highly profitable, and they are in a segment that is generally good. I don't foresee on that side a lot of profitability and therefore increased pace. It's a general high activity, but not increased. On the tech and M&A, possibly there could be targets who come into financial difficulties if you invested a lot. I don't think we have seen a significant impact in increase in activity there so far. I think in general, there is an active or very active market in this area with a lot of opportunities in the different angles.
That's clear. You have that 9,009 employees and consultants in the quarter. I asked this question in the Q4 call as well, phrased somewhat differently, could you, to some extent, just elaborate a bit on how those FTEs are split between the different buckets internally? How do you divide recruitments, in terms of functions?
I think I can maybe try to address that one, Oscar. I think, Ramil, and maybe request the operator as well at the same time. We move on to some of the other questions. If there are other questions, we can come back to Ramil, after this question. Hope you don't mind about that, Ramil. I think on the investment side, we say that we're investing in the organic growth, we're investing in the operational efficiency, and investing in new technology. I think those are where the majority of our recruitments are going into those three buckets. I don't think we give a split in terms of how much of that goes into those buckets. The majority of our investments are in the core business and the organic growth that we're driving.
We're obviously cautious and want to see results in the new investments that we choose to make at an early stage. We're resultant in that sense.
Perfectly fine. Thank you very much.
Thank you. Next question comes from the line of Predrag Savinovic. Please ask your question.
Thank you very much. Good morning, guys. First, one follow-up from Ramil's question on the messaging volumes. When looking at the distribution of external net sales, we see France down somewhat year-over-year, Germany down, U.S. grows by a lot. One thought could be that the lockdown measures came to the U.S. in the latter part of the quarter, and will hit fully in Q2 potentially. Could there be any risk of traffic volumes coming down in the U.S. from this lag effect, so to speak?
It's a very hard question to answer. I have personally not been in these times before, and I think that goes for most of us. It's very hard to predict what is going to happen on general. The U.S., yes, it's a little bit later than Europe in that sense. I think we think more on the impact more on the segment base than on a geography base in general. I think we think more on, all right, the travel industry is going to be impact. The retail marketing industry is going to be impact. The e-tail marketing is probably going to increase on the big tech side, with a lot of the comm services are probably going to increase.
A lot of our U.S. volumes is obviously big tech, but also a lot of the e-tail side, or those type of companies, being a big portion of the U.S. economy. Very hard to say. Generally, we have quite a few large segments in the U.S. which are relatively less impacted as well, would probably be my answer to the question. These are unprecedented times, and we don't know, also has to be a large portion of the answers. We didn't expect the March spike, for example. That was not something we foresee.
I think just to complement what you're saying, also maybe two comments, Fredrik, for you to take. One is, I think reflect that the spike that we're seeing, what we're saying is that a portion of that spike is driven by the coronavirus impact, and a portion of it is, of course, the normal unit business growth that we have. The spike that is coronavirus-related may be, what we can see in April is that it is returning to more normal volumes. It may be more short-term and not long-lasting, right? The other thing, I think, when you think about country distribution, the country distribution that we have in our report is based on where our customers are based and originating markets, so to say, of our traffic.
If you look on where we terminate traffic, this is really more reflecting where the population is and where smartphone users are, mobile phone users are globally. That affects, of course, our gross profit, depending on where we are terminating traffic. It's a much more global picture than our originating view that we provide in the report.
All right. Super. Great. A question on, I know you can't comment on rumors, but I still need to ask a question on the articles regarding SAP and Sinch yesterday media. Put it like this. Are you familiar with the portfolio of the Digital Interconnect division of SAP? Do you see that they have offerings or technologies that you benefit from?
Obviously, you know the answer to the question. We never comment on any such rumors, of course. You know that. If you ask the question in general, do we know of a major player competitor in the market? Of course, we do. We cannot give any more comments on that. Of course, we know the major players in the market. Yes, we know of them and all other major players in the market, yes.
All right. I'll just move on to a different theme. On the cash flow for Q1, it looks very solid, and has improved really since, I think, Q3 last year. I guess I'll tilt my hat to Roshan here. Can you let us know the reasons for this improving trend on cash collection and what you've done here differently?
Yeah. I'm glad to say that you call it a trend. I'm not calling it a trend yet. I think obviously, we work very actively with working capital. I think that of course is a very important thing for us and the focus across the business really, not cross-functional effort. I think it takes time to show those working capital improvements, and probably even two to three quarters is too short to really say if that is a lasting trend. The second thing, as I said, just this quarter, on paid taxes, we have some one-off effects. That will most likely come back during the coming quarters.
All right. Super. On COVID, again, just a question here, more forward-looking. Full April is almost in the books. Can you say anything about the trends in messaging for this month? Any flavor? I know you don't give guidance, but anything you can mention here on April so forth?
Roshan, do you want to take that?
Yeah. I think, Ramil, sorry, Predrag , I think the comment that we made on April volumes, what we can look at messaging volumes, and voice and video volumes quite following what we, on the messaging side, coming back to more normal volumes and not seeing the spike, maybe the extraordinary spike that we saw in March. On the voice and video side, where the volumes now continue to follow what we saw in the end of March, when the lockdown restrictions were first placed in many markets around the world. I think that's what we can comment so far. I think, we should also consider that temporary spikes are maybe not as gross profit contributing as long-term traffic trends. I think that's one thing to consider. That's reflected in our gross profit per transaction graph that we're showing in the presentation.
That's super. Thank you. Just one final before moving on. Considering Wavy, we will not consolidate until earliest H2 this year, probably towards the end, your integration processes here, or this integration backlog is not going to start until then. Could you see yourself acquiring something before the consolidation process starts? Would you be prepared to?
Yeah. As we always say, we have an active M&A agenda, we're continuously evaluating targets. I think more than that, I think we don't comment on specific M&A timing. I think that's where we are.
All right. Super. Thank you very much.
Yeah. We're happy to continue a bit longer if there are more questions, operator, but please restrict yourself maybe to a couple of questions, and we're happy to take follow-up questions offline after the call. Back to you, operator.
Thank you. Next questions come from the line of Fredrik Lithell. Please ask your question.
Thank you. Good morning. If I could just have two questions on the operator division. If you could sort of describe a little bit more on the SMSF and the business model between you and Ericsson, how that will work going forward, and how we should sort of see it in the operator division going forward. On the Q1 figures in the operator division, was the sort of the little bit better trend you saw there, was that a sort of a capacity upgrade? We have seen other suppliers of equipment to telecom operators see capacity upgrades in the quarter. Is that something you had there, or was this a sort of a new contract that you had been negotiating for some time? Thank you.
The first one, Thomas, do you want to take that, or Roshan, or should I?
I can start with that one. Roshan can fill in. Generally speaking, in the operator segment, we have most of our business is product related, and through time and when it's completed at some stage, we're invoiced and paid. There is a certain volatility or lumpiness due to that. I think the reference I recognize from telecom vendors in the sense that you have a license key to unlock software. We do have those elements. We've had those historically. I believe this is not a project of that sort. Perhaps Roshan can elaborate.
Fredrik, on your first question, we have a long history of delivering SMSCs software to mobile operators, both in partnership with Ericsson and outside. What happens in the 5G world, of course, is that you need a machine that can sort of connect the old SMSCs from previous generations to new generation traffic. This is exactly what we have developed or are developing and are very excited to partner with Ericsson to deliver to their customers. The typical model will be a typical software model where we're delivering a software product with upfront revenues and a smaller sort of percentage maintenance revenue going forward. That's not different from our other operator software deliveries. When it comes to the spike that you saw in Q1, obviously this is a contract that we've had for a while.
Under that contract, we had a project that we actually expected should be delivered in Q4. It wasn't delivered in Q4, and so we didn't book revenues for it, and we're happy to have concluded that in Q1 and book revenues with it. It's a bit of a sort of timing difference, really. As we've always said in the operator segment, I think that's to expect there will be such timing differences from time to time.
Okay, perfect. Thank you.
Thank you. There are no more questions on the line. Please continue.
Thank you. I believe the questions on the webcast have all been covered. I want to thank all the participants for dialing in, and tossing back to Oscar for a final word or two.
Thank you, Thomas. Yeah, we're obviously very happy to report a strong result in these unprecedented times. We hope to continue to deliver good results, even though, as you understand, we need to be conservative, and it's very hard to project for us, and I understand it's hard for you as well. So far, we're super happy for the results so far, and we keep on working very hard to continue to deliver in the future as well. Thank you all for your time on this call, and thank you.
This concludes the conference for today. Thank you for participating. You may all disconnect.