M&A Announcement

Feb 17, 2021

Slides

Thank you very much, operator, and welcome everyone to this update where we talk about the acquisition of Intelliquent announced earlier this morning. We are reporting our 4th quarter results tomorrow, Friday, 18th February, which means we will restrict the discussion today to the acquisition of Intelligent and leave other questions for tomorrow. With those opening remarks, I'll hand the word over to our CEO, Oskar Banger. Thank you, Thomas, and thank you everybody participating to this brief presentation of the acquisition of Intelliquent. So we are very, very happy to announce today that we have reached an agreement to acquire Intelliquent. Intelliquent is the leading voice connectivity player in the U. S. And I think it really complements our offering in a very logical way. That said, operator, go to Slide 1 or 2, whatever you want to call it. 2, I think it is. So this is Cinch, and this is Q3 numbers pre Intelliquent, but where we have added the wavy numbers to people, countries and 1,000,000,000 engagements. And so by Q3, revenue of $6,600,000,000 adjusted EBITDA of 786 1800 people, 47 countries. We do 120,000,000,000 engagements per year. If we Average of this out on the $9,000,000,000 population on the planet. It's on average 14 engagements per mobile phone on the planet each year. So it's a high volume business, of course. Cinch, as many of you know, were in messaging or in voice and Vimeo. We've always been the lion's share messaging, and we had a voice business growing successfully, very successfully before COVID. It a little bit of a hit in COVID. We have always known that at some point, we would want to add the next Step, basically the voice business, which is a large part of CPaaS, to our offering. And when we saw this opportunity, we thought that time was right to take this very logical step and add a Significant voice business. We are now standing on the messaging leg and the voice leg in a major way basically. So that's If you want to simplify it down, but that's what we're doing. We are serving 8 out of 10 of the largest U. S. Companies. We're obviously doing that on the messaging side today. We see big opportunities obviously to approach the same type of customers with a very strong voice offering. So that's part of this deal. And Intelliquent obviously being serving the largest U. S. Tech companies or U. S. Companies. They have a couple of those customers companies as customers as well. Like we said before, consumer penetration being 100%. And I mean that both on the messaging and on the voice side, right? I know that all of you on this call have received a message from your dentist or your airline, but most of you have also called a company called Uber via the ride hitting up or called a company to their customer care center or may place the call into this type of conference line, that is the voice business and that is the CPaaS voice business basically. And I think it's a very natural evolution of as humans messaging, I mean our preferences are moving to messaging A lot because it's simple, it's asynchronic, you can do it from your sofa. So that's a trend we see. But there's always a very large part of the communication with enterprise, which will be voice enabled because you can't text everything, right? You can't what's Everything, it's just too short form. For some use cases, it's great and that's growing very well. But in some cases, you also want Contact the companies and talk to them, and that's kind of the voice or the video. And there you see the kind of the collaboration between those 2. So sometimes you want to do voice, sometimes you want to do messaging and you want to enterprises want to have a joint customer journey where they can seamlessly move calls or communication between those channels. And by adding a big voice offering, we obviously strengthened our ability to serve companies to do that seamless collaboration, seamless moving up channels. And as you know, yes, we've been profitable since our foundation. I think this acquisition strengthens Our profitability, this is a highly profitable company, established company with very large and very solid customers. It strengthens our profitability in a very good way. All right. Operator, move to Slide 3, please. So we are, As you know, targeting a global scale and leadership. This is a huge market with a 100% penetration of consumers on the planet. And in principle, every enterprise that wants to communicate with consumers are using or are a potential customer of these type of services. And we are taking the kind of the scale play. And this acquisition plays very well into that. And on the graph, you can see our gross profit in the last years and our adjusted EBITDA. And you can see the addition of the latest acquisitions. And you can see how big of a play Intelliquent is, both on the gross profit and on the EBITDA level, of course. So this is a thing that really drives up our scale. And apart from adding a significant voice business. It drives up our scale. We focus on gross profit since past due revenues vary between geographies and they also vary between product offerings, right? And we're going to see that more and more. If we compare like to a voice business, while they may have a different gross margin profile. So trying to compare both between geographies and between big product lines The picture and we'll distort the steering of the company if we try to compare revenue. So gross profit is the only thing we look at. And as you can see, acquisitions are adding significantly to our scale and profitability. And Intelliquent adds 62% to full year gross profit and 78 to adjusted EBITDA. So it's, as you can see, a major acquisition for us. All right. Operator, let's go to Slide 4, please. So here you can see how we're rebalancing the company and yes, giving us a couple of more legs to stand on. So basically adding voice and strengthening our U. S. Presence it's 2 things that we do in a major way with these acquisitions. And if you look at the leftmost graph, it's gross profit rolling 12 months and its pro form a as per Q3 including Intelliquent. So you can see the Cinch business in yellow and what with the combined entity when you add the Intelliquent business. So basically, we've been very messaging oriented and now we a significant voice business basically. So you see share of total gross profit, messaging comes 42 and voice and video becomes 29. Intelliquent is also and this is serving enterprises in voice. So that the middle part is serving enterprises and voice. And on the and then on the operator side, Intelliquent has Just like us, they have a significant piece of their business is serving operators, serving the largest U. S. Operators So that's pretty much how you can gain scale and gain profitability in the U. S. Noise business. So we add a significant revenue line from the largest U. S. Operators. So that's also that part of the business is also growing. It's nothing new to us. We had it before, the SDI acquisition. We strengthened the operator part with the SDI acquisition and we strengthened this part of the business as well with this acquisition. And it looks pretty similar to what we've seen before. The operator business is very stable, very profitable and grow slower, while the enterprise CPaaS business is has a much higher growth rate. And that's the same for us on Intelliquent. You can also see the headcount distribution. We're significantly strengthening our North American presence. Intelliquent is some 600 employees with a lion's share being in North America based in Chicago. So you're seeing here that Europe is Central's biggest region and North America is almost coming up to the same level. And Asia, especially after the ACL acquisitions, is also a large portion and Latin America, of course, after Wavy and TWW. So we're also rebalancing and being more balanced geographically from a headcount distribution perspective. We think this is great. This really shows how low the market is, and it gives us an even more balanced customer concentration and then headcount concentration. All right. Operator, let's go to Slide number 5, please. So we play according to the playbook that we have now laid out for many quarters now. We have a connectivity business and we have top process service business on top. The connectivity business, like I said before, has been is making sure the message gets there, transmitting the message or placing the voice call, making sure the voice call is connected or making the video call, making sure the video line works. That's what the collectivity business is. And then the SaaS business on top is adding interesting software as a service components on top like chat layer to take an example where you would not only send the message, you would also tell your customers, hey, we can interpret we cannot only send the message, we don't interpret the intent that the user has in the response to you. So we can tell you, you have received this message and the users you wanted to cancel the ticket or they want to speak to a customer service representative. That's kind of one example of the SaaS business, which can be much, much broader, but take one example. And Intelliquent is squarely in the connectivity business. They are the largest voice a standalone or independent from the operators connectivity player in the U. S. So if you want to place A voice call from any CPaaS service or cloud formation tool or UCaaS or contact center, they are the largest provider for such services. So making sure the voice calls are delivered at a high quality. That's what it is, so in the yellow box. Obviously, If we take the chat layer example, chat layer would work both on a messaging transaction and on a voice transaction. So we can add the chat layer service to the Intelliquent business as well and say, hey, we cannot now not only place a voice call, we can also interpret what the user said on the voice call, if you so wish, and Mrs. Customer. All right. Operator, let's go to Slide 6, please. So again, we're following our M and A agenda. So we're leveraging M and A to meet our strategic objective. Like I said, this is a very large market. We think that we can build everything in this market organically. It's not going to be feasible. It's going to take a very long time, and there are entrenched players in many markets, but It's just not financially viable to compete with, and then it's better to require established payers, and that's exactly what we're doing here. So this is an acquisition in the scale and profitability category. So we acquire a lot of sticky customer relations in CCaaS players, contactless players in the UCaaS Unified Communications, in the collaboration tools that are placed like Zoom and etcetera, in Big Tech and in the operator space. So a lot of very good strong long term customers. We add direct operated connections to all the U. S. Carriers. And now we're not only talking in voice. We're not only talking about the biggest carriers. We're also talking about ability to connect to all the rural carriers or the vast majority of the rural carriers out in the countryside, which is a very large USP on the voice side and to be able to make all voice calls. We're to leverage shared platform. In this case, we're actually going to be running the voice Intelliquent platform. That's going to be our voice platform going forward, which we're going to build on and we're going to have a messaging platforms. These will be stand alones as opposed to a technology acquisition. We won't merge the connectivity part of these platforms, but we're going to put a joint CPaaS layer on top of them so the customer sees it as a unified offering. And this is obviously EBIT to EBITDA accretive, but fits very well in the scale and profitability category. All right. Operator, Slide 7, please. So again, this is The past acquisitions we made, and as you can see, the Intelliquent acquisitions kind of fits well in the scale and profitability, but then also adding a large voice offering, of course, to us. So operator, Slide 8, please. So the rationale. So first, what is it that we're acquiring? We're acquiring the largest independent voice communications provider in the United States. So we believe this is the prime asset in the U. S. And U. S. Is our Number one market when it comes to voice. And the reason for that is that there are some Offerings coming out in the U. S, where you really combine the voice and the messaging business, you can like send the message and on the same number you can call back in, which we think is a great driver for consumer adoption and then for consumer adoption. Intelliquent handles 300,000,000,000 voice minutes per year, and they have roundabout They handle or manage run about 100,000,000 active phone numbers. That is roundabout 10% of the number of phone numbers that exist in the U. S. Are handled by Intelliquent for various CCaaS in UCaaS and Cloud and CCaaS or Compact Center in the Cloud solutions. They are around 600 NPEs, including contractors with headquarters in Chicago, Illinois. The deal rationale is very straight Forward. It's basically establishing as a leader in voice communications and following our strategy of selling to the largest U. S. Voice customers. So in principle, what we do in the messaging side is we have a where we come from, what our core has been is like we have this Very strong, very solid messaging network giving the highest quality to the highest volume customers. That's kind of what our core and then we've added a lot of SaaS services involved. And Intelliquent is that in voice communications in the U. S. In order to serve the largest U. S. Voice customers, you need to own and operate this type of network on the voice side, and that is what we're acquiring. And again, they don't have so much on the CPaaS service on top. So that's what we're adding from that we're adding to Intelliquent in order to increase the growth. They have a super network for voice reaching 94% of the U. S. Population without middlemen. And so that is connecting to all these rural carriers. So they are a leader in reach, reaching the vast majority of the U. S. Population. So that's basically what we're doing, making us a voice players in the largest voice market, which is the U. S. And making us a leader in that market, especially to the high volume customers. Integration. So we're estimating integration costs to run about $5,000,000 over 18 months. We believe there are large cross and upsell opportunities for Cinch and Equality product portfolio. We will Reinvest of this very profitable company some $15,000,000 to $20,000,000 of their EBITDA to accelerate the joint KeePass roadmap in voice and strengthen the enterprise go to market. So we're basically saying We get a very strong network, very profitable player. Let's add more SaaS and CPaaS services on top in order to increase the growth rate of this extremely strong asset. I think that's a very logical thing to do given the profitability and given the growth in the CPaaS market. So we're basically saying, hey, look at this as you have this profit, but we will invest this amount in order to increase the growth. So that's how you should think about it. Financials, enterprise value of US1.1 billion dollars Closing is subject to regulatory approval, and this is both from the telecoms regulations. You've got to go through each state from an anti competitive. Obviously, we're not large in voice. So the anti competitive, we will go through, but They are not large investing, and we are not large in voice. And this and since they are regulated by Telecom Regulations. It will take some time to close this transaction, so we expect it to close in H2 2021. Reported revenues of $533,000,000 gross profit of $256,000,000 EBITDA of $135,000,000 in 2020. And but we they have had a really strong run due to COVID, due to all the the kind of the uplift of cloud collaborations. So we would look at it of a if we avoid this temporary COVID We will look at it as a revenue on a run rate basis of US499 $1,000,000 gross profit of $2.33 and adjusted EBITDA of 112 So that's what we are looking at when we do all our numbers because great that they have a COVID uplift, but we want to look at the long term business here. Underlying year on year revenue growth around 11% over the last 12 2 years, driven by faster growth on the CPaaS segments and then the operator segments a little bit lower growth. All right. Operator, next slide, please. So So we're now on Slide number 9. I think this is looking at all the market external reports, you can do that and you would see that messaging is the largest part of CPaaS and voice is the 2nd largest. I I think it's very logical to be take part of that market. And the in this part from IDC, CPaaS voice is With a CAGR of 33%. You can see if you look at the Twilio or Bandwidth reporting that They're growing in between 20 to 30, even a little bit higher in bandwidth case in CPaaS Voice. So you see the 2 largest public peers or comparisons, you would see this type of growth numbers. And it's very logical to take to that market and drive it forward. And here, we're talking about the Heat Pass portion of this market, not the operator portion. And I think where growth is driven by the continued digital transformation of communications and the increased use of API based voice products basically. And I think the other thing that is very, very interesting is increased convergence of voice messaging. So to give an example of that, if I'm here in the U. S, I am. When I go to my car dealer, I get text from the car dealer. From the person I talk to at the car dealer. I get a text message from them to say, hey, your card is available to pick up. I can either respond to that message via text or I can click on it and I call and both of those things, even if I text them or I call them, will get routed to the same person, which is a very convenient service that you can choose. Well, this question I just want to text and this question I want to talk to a representative. It's a very convenience and extremely fluid. And obviously, serving both sides will give you a great opportunity to drive these conversions and then drive better services for the joint services for the enterprises. All right. Slide number 10, operator. So to position this and to tell you we're not making all of this up, looking at Gartner's SIPA stack here, This is how Gartner would describe the market, would describe the CPaaS layers CPaaS stack in a couple of different layers. Working layer. Layer 2 is the cloud communications API for the various channels, like you have an API for voice, one for SMS, and one for RCS, etcetera. Layer 3 would be modules or wrappers layers, maybe have like one API covering all channels, which can be voice and messaging and various channels. And layer 4 is like more the complete solutions, contact center, unified verification, CRM exactly, and layer 5 is marketplace. We define our market as the level 1, 2 and 3. We don't define our market as like unified communications or CRM. We believe there are Bigger companies focusing on those, and we don't intend to do it. So we focus on the layer 1, 2, 3. And here, you can see in highlighted in light green here the areas where Intelliquent really complements our offering on the networking layer and the cloud communications API for voice. That's where they really complement and gives us a strong business. We will then do the omnichannel APIs on top in order kind of do the combination of voice and text messaging, voice in RCS, voice in Apple Business Shop and what have you. So that's kind of what we will add with this $50,000,000 to $20,000,000 extra investment in order to merge those type of companies. And in both voice and messaging, we do like focus on differentiated by quality and securing profitability to superior scale. All right. Operator, let's go to Slide number 11, please. So this is America's leading independent super network voice, 100,000,000 phone numbers, 300,000,000,000 voice minutes, 37% greater local number coverage than other providers. So basically being able to supply a number that is local in Montana is key for the Montana Enterprises. As you can imagine, that's very large barriers to entry. It's hard to build up such a network that covers all of the U. S. Even with the rural carriers, and that's kind of Intelliquent's core strengths. And we got a 99.999 percent uptime, but by 43 georedominate points of presence across the U. S. So this is a hardcore high quality service provider. So talking about customers. So they're serving the category leaders in every sectors of voice. So this is to me, if I say one thing, If I want to be a voice player in the U. S, I want to be big and I want to serve I want to have the ability to serve the largest customers. That is exactly what Cinch has been doing. So the they serve the top 5 collaboration companies, and these are Companies like everything from the Zooms without naming specific names here, but everything from the Zooms to the Cisco Webexs to the 8x8s, to the RingCentrals, to the UCaaS players and the contact centers in the cloud type services. So those type of companies, the largest companies on the planet doing such business in the U. S. Are served by Intelliquent. And the communications platform companies, there are more companies like the CPaaS providers, of course, but it may also be the maybe the Skypes or maybe the Microsoft Zooms of the world, etcetera. And then you have 10 out of 12 of the biggest VoIP companies as well. So that's kind of on the enterprise side. And on the operator side, You have the top 5 wireless carriers, cable companies and wireline companies in the U. S. As customers. So a very well balanced mix. And if I a little bit more specific on the customer segments on the enterprise side that they all the UCaaS Unified Communication as a service, those type of companies, all the CCaaS, the cloud the cloud contact centers business basically. It's the collaboration tools that's the Zoom and the Webexes, Cisco Bembecs. It is the CPaaS providers. People like us typically buy from players like Intelliquent and our smaller invoice, I would say. And it's the big tech companies is also a category that they are focusing on and that we are focusing on. So it's a very, very interesting type of customer mix here. All right, operator, next slide please. So roundabout well balanced business, what they call the CPaaS is what I just described, serving to the enterprise customers. Run about half of the gross profit is from that area and half of the gross profit is IaaS serving the wireless carriers. And so half and half and the CPaaS market growing significantly faster than the IaaS market. On the other hand, being strong and selling to operator gives you scale that gives you a lot of profitability and a very good price point in the CPaaS market. So I think the combination here, just like in other markets, is very strong because it gives you scale and profitability to be able to drive the unit cost down. It is also so in this business operators and operator relations are Extremely important. And we obviously have become very close to the largest U. S. Operators by doing this. The U. S. Operators are effectively outsourcing a part of their voice termination network to Intelliquent. And having that relation and strength of the U. S. Carriers is a very strong position to be in. All right. Operator, next slide please. And I leave that to Roshan. Thank you, Oscar. And again, good afternoon, good morning to everyone calling in. Super happy today to be walking you through the acquisition of Intelliquent, a leader in voice connectivity and also addressing or increasing our addressable market. As Oscar outlined, this is a financially accretive transaction as well and contributes significant EBITDA of of $135,000,000 We are confident that we will replicate our proven playbook from messaging building on Intelliquent's strength. Talking to financial leverage. As you see on this page, at the end of the Q3 2020, we had reported a financial leverage, actually a positive cash position of 1.2x EBITDA. Post The acquisition of SDI and closing of the transaction of Wayby in Q1 of 2021 as well as the share issue that we completed towards the end of last year. We have a pro form a net debt to EBITDA, which is again a cash position of 1.3 times EBITDA. On a pro form a basis and including then the EBITDA of Intelliquent As well, our pro form a net debt over adjusted EBITDA would be 3.7% on those figures. However, we do believe that due to the organic cash generation and earnings growth, this net debt will decline during the course of the year. We have stated that the closing of Intelliquent is expected to take place in the second half of twenty twenty one. We've secured credit facilities to finance this transaction, and we have also access to cash and balances. In addition to that, the credit facilities in the form of acquisition financing have financial covenants that will allow us to complete this transaction and take on new debt. If we move to the next page, operator. Again, just a very quick reminder of Our financial targets, we have a financial target to grow our adjusted EBITDA per share with 20% per year and keep our net debt to adjusted EBITDA under 2.5x over time. We have consistently said that we might exceed that during a short period of time. On a As of the Q3 of 2020, our adjusted EBITDA per share grew 51% measured on a rolling 12 month basis. And our net debt to EBITDA was at a cash position of 1.2. On a pro form a basis, even after including all of the transactions that are currently closed. It will be a cash position of 1.3. Together with the acquisition of Intelliquent, As I said, we would end at SEK 3,700,000,000, but we expect this to decline during the year due to cash generation and earnings growth within the business. With that said, I will hand back over to you, Oscar, for closing remarks and Q and A. I think you might be on mute, Oscar. I was talking away and saying great things here, Sorry about that. Thank you, Rashaan. Yes, the summary to me is very straightforward here. We CPaaS industry comprised of a set of major channels. Messaging is the largest. That's what we're focusing on. Voice is the 2nd largest. We are now entering that space. It's a very logical move because CPaaS industry consists of these 2 and a couple of other big channels. So we want to occupy these channels. To us, Intelliquent is a very logical move within that category because It is in the largest most important market in the U. S, the leading connectivity player, and it has the ability to sell to the largest customers. And that is Our strategy has been our roots and heritage on the messaging side, and now we're adding a very similar player on the voice side. So that's kind of the rationale from that and being able to serve the largest U. S. Voice customers. Then again, what we do with this in addition, we say, all right, let's strengthen the CPaaS layer on top, the self serve, the tools, the programmability of this. So we take a portion of the profit and we reinvest that on to create to increase the rate that we develop this CPaaS A on top because we believe that's going to increase growth of the Intelliquent asset basically. So we think that's what we're doing. I think that all of these is a very logical move for us as a company, and I'm very, very, very happy to have made this transaction. That said, thank you. Over to you, Thomas, and open up for questions. Thank you very much, Oscar. And operator, if we have any questions on the line, we're happy to take them. Thank you. We are now taking our first question From the line of Stefan Gauffin from DNB Bank. Yes, hello. A couple of questions. You're talking about reinvesting SEK 15,000,000 to SEK 20,000,000 of EBITDA to accelerate Finch and Intelliquent's joint road map. You also mentioned some USD 25,000,000 integration cost. Can you talk a little bit about synergies that you expect to see from this transaction, both revenue wise and on the cost side. Secondly, it's clear that you strengthened your U. S. Position. But I guess adding voice, you also strengthened your global position on the CPaaS side. Can you talk a little bit on what you're seeing here and how fast you can have something to provide to your global customer base? Thank you. Sure. So first question was on synergies and then just start with revenue synergies. So first, we there are Particularly when we give synergy figures, we don't include revenue synergies because they may it's so hard to count them basically. But yes, we do believe there is significant revenue synergies here. I mean, selling messaging to the Intelliquent Sturmurs and selling voice to the same customers. So that's kind of to put it simple where we think the revenue synergies are, it's very straightforward. It's 2 very major segments of the market and there should be things there. And on the other synergies side, on the cost synergies, there are This is as opposed to a messaging platform and where we would shut down the messaging platform and move all the customers over to our platform and up and down and thereby drive significant synergies from that type of operational saving. We're not combining a voice connectivity platform with a messaging connected platform because they're just different things. So this is not a synergy case in that sense. Of course, with the global scale, you get bigger marketing and finance and operation. I mean, of course, there are synergies, but we're not counting them as a major synergies case as we have done before. But over time, of course, we will extract things. But that's why We're not focusing on that area with this type of transaction. So that's what we're saying. On the investment side, very logical. We see a CPaaS market growing very fast and a clear need from voice CPaaS customers is tools like self-service tool, being able to sign up online and being able to handle numbers via ease of use APIs, being able to program your voice services from ease of use API, so terminate a call, make a new call, record, transcode, etcetera. And adding that type of layer, we believe, will increase the growth of the asset. So that's a very logical thing to do when you have this asset. And then integration costs, hard to estimate at this stage because you need to Speak to the company in a much more detailed level to know. But we made an estimate of past acquisition, what does it cost So now we use same CRM systems, same IT systems, brand rebranding, etcetera. There are always costs to do there, and we've seen focusing on take the investment in order to get the lines. We have max speed forward. That's kind of what we want to do. So that's, I think, the answers to your first question. And can you please repeat the second question here? I think you basically have answered that. It was more what this acquisition brings to your portfolio when looking at your global customer base? Yes, right. So the global customer base, the good news is that the majority the U. S. Is overrepresented in global enterprises, right? And you see that both fronts of the centered in global enterprises, right? And you see that both from the big tech side and from global enterprises. So I think this enables us to go to the largest enterprises on the planet, both in big tech and large traditional enterprises, if you will, and sell them both voice and messaging. So that's what it does. Obviously, we can't sell a U. S. Voice offering to somebody in Europe. But then let's see what we do if we can roll this out grow in various countries. That is something that Intelliquent is in process of doing anyway. So That could be a lead, but targeting U. S. Big enterprises and U. S. Big take obviously prime on the global enterprise side. Can I ask just a small clarification Stefan as well on the first question, Rochin here, Is that the $25,000,000 includes both acquisition or transaction related costs and integration costs? Just Small note on that. Maybe that was clear to you, but I thought it was worth pointing out. Yes. Thank you. Can I just ask for another clarification? You mentioned a pandemic effect of some $20,000,000 to $30,000,000 on revenue, gross profit and EBITDA. Can you just explain a little bit on What this is and how you see that developing? Yes. The pandemic effect is like you think about you make a Zoom call, I think we're all more on Zoom now than we were before. Then on average, 15% of all the call ins to such a line would be voice call ins. And you can just imagine the number of Zoom calls, the number of BlueJeans calls, cloud operations, those type of calls has really gone up. And then this 15% is obviously going up as well. That's just one example. So communications online has increased. We drag up the number of voice calls. Another one is like Amazon, more home deliveries. And when you want to call Amazon to look at your delivery, all right, then you make Maybe start with messaging and then you go to voice. That's obviously has a COVID effect. Part of that is kind of A blip, right? Because if we go back to work, then the number of calls will go down. But part of it, I think we all believe, is going to be here to stay because we're going to use more collaboration skills going forward. But we just estimate that if we take away what we believe is the blit to take it down to a more run rate level. So this is a company that is clearly positively affected by more online collaboration, of course. That's what we're doing. Okay. Thank you. We're taking our next question from the line of Daniel Durburg. Please ask your question. Thank you so much and congratulations gentlemen And value adding acquisition, I believe, please. My question first question would be a little bit on how important the infra as a service Infrastructure as a Service and the super voice network that Intelliquent offer has been for their enterprise communication platform as a service growth and if that is a hurdle for you, if you're aiming to do this international International expansion together on the Wuho side. So I think it's a prerequisite to the network is a prerequisite to sell to the largest customers. It's as simple as that, right? You won't sell to the contact center players, the U. K. Players, the big collaboration firms, if you don't have the volume and you need the network to get the volume. So if you don't have that and are a CPaaS player trying to be in this market. You're kind of restrained to sell to the smaller customers or can be very large, but they cannot be the largest basically. So I think it's a prerequisite to sell to the largest customers. To do internationally, yes, of course, you need to do the same thing internationally in order to sell to largest customers in Azure. And that can obviously but and what we see like now we have one of the largest U. S. Voice players on the planet since Eurus is one of the largest voice markets. And we believe about the same platform with obviously adaptations can be used in other markets if you do an international expansion. But there's obviously always quirks what you need to add. And like when we enter on the messaging side of the market, there's always quirks. But we believe starting with 1 of the largest and most professional voice players in the market is probably the best starting point that you can get. Perfect. Thanks. And another question, if I may. In terms of CapEx investments ahead Intelliquent, is it any large they have a very good coverage for this super voice network, obviously. But do you See large investments of some sort coming years? Yes. That's the question. Very good question. That's something that we have been looking at in the DD. We didn't want to acquire something which was underinvested. To the best of our knowledge, and we have asked this question many times in many different areas, we believe they're well invested in their network. Their CapEx investment in their network have been higher than normal the last couple of years. So they have not underinvested. They've kind of overinvested in the last couple of years. And we believe the network is in a good standing. And obviously, in anything, you need to continue to invest in this business as anything else. But we don't expect that rate to go above what it has been before. Perfect. And my last question, if I may, just first, just out of curiosity. Is the acquisition a result of Cinch winning a bidding process? Or have you initiated the process or how these happened? I'll let Thomas answer that question. Yes. So I mean every deal has its unique characteristics and we prefer not to go into specific details on the individual case. I think what we're seeing here is a good strategic fit and both parties could identify that at an early stage and it's been a very fruitful corporation to reach the point which we're at today. Perfect. I agree. Thanks. Good luck. Our next question comes from the line of Pedro Savinovich from Carnegie. Hi, guys. Thank you very much for taking my questions. To Oscar, you made some examples on Top collaboration platform VoIP companies on the CPaaS side, which is Intelliquent. Think of the growth ahead here, will that come from These companies themselves growing organically or can you grow this sharp wallet? What kind of sharp wallet Are you having in this category of customers, so to speak? Or is it more new customers onboarding? No. But I think These companies, I think it's both, which is the characteristics of a good business, right? These companies, I project, will grow. I don't know more I mean, yes, I think we all believe that cloud collaboration companies will grow over coming years, right? And on the back of that, there will be voice calls. So we believe that will grow organically and Cinj Voice will grow on the back of that. Then I also believe that the CPaaS portion of the market of enterprises integrating voice and messaging into their customer engagement journeys will grow significantly. And that's more new customers. So I think you got like Okay. The collaboration tools, the contact center people, the UCaaS people and the big techs, they will grow organically and growing on back of that. Obviously, winning more of them and winning a high end wallet share and all of that is included in that category, but that's kind of yes. And then kind of adding a SITAS offering in order to kind of more capitalize on the enterprise growth as well. So Yes to both, which I think is the best possible way to be the best possible position to have. All right. And convergence is important. It seems like the key word here, I guess, harmonizing messaging and voice. And for a large Tech guys on the customer list, the benefit is clear. But if you take, I don't know, say, take a bank that uses Cinch for messaging And what would the benefit be from harmonizing it on the voice side? And can you deploy this in a broad and scalable way in the U. S? Yes. So take an example, fraud alerts. You get a message notifying you a fraud alert. Would you, as the customer experience manager of your bank, want the customer just to be able to click on the message to make a phone call into the right person at your bank? Or would you rather want them to go online and find that number somewhere? That's the convergence for your bank. It's a very, very powerful tool to just like we send this message. At this point, when the message is sent, we connect this number in this message to this individual. To you as a consumer, I think it would be very powerful for you to avoid having going online and searching up Bank of America's phone number and then seeing, right, this is where I am, I'm standing in line, connecting you through 57 different departments in order to get to the right department and then talk representative. If you can just get connected directly right into the right place, I think it's a very powerful thing. And I think also conversely, If you have made a voice call, just being able to say, I forgot this, and text it back in to the bank and it gets to the right person because you made this voice call is another very powerful figure, right? And being able to get a response from it. So that's your example. I think we both can come up with examples of pretty much any enterprises of the same type of services. Makes sense. And just finally, if you could take like a side by side bandwidth versus Intelliquent similarities, differences between these and then looking at bandwidth, Noticing that 8x8 is a customer. They're a customer with Intelliquent as well. Can you take all of this? Or is it a logic for Intelliquent Or if I could partner with both Bandwidth and Intelliquent? I think Bandwidth is Intelliquent's biggest competitor. And Intelliquent is bigger by volume and by revenue and by gross profit and certainly by profitability, right? The bandwidth is Right above breakeven right now. So in terms of voice connectivity, Intelliquent is as a leader and bigger than bandwidth, but bandwidth is the number 2 in the market basically. So that's kind of the position. Then bandwidth, what bandwidth has done is exactly what we're doing with this $15,000,000 $20,000,000 investment. They kind of added and strengthened their CPaaS layer. And therefore, they are in CPaaS growing faster than Intelliquent. So they have done exactly what we intend to do here and showed and paved the way or made a case for that this is possible to do from a voice connectivity play. While we believe that the combination of Cinch And Intelliquent being both bigger in voice, being much stronger than bandwidth in messaging and adding a better kind of voice CPaaS services will make a stronger combination than bandwidth in CPaaS if you're an enterprise buying CPaaS. So that's how we would see it in a comparison environment. From an 8x8 perspective, well, I definitely this is a big market. There will obviously be multiple flyers. And I think both Bandwidth and Intelliquent or Cinch Voice will be prosperous in the market going forward. And there are a couple of other companies like Lumen or Centrelink and there are other players in this market. It's a big market. So that would be mid there will be several players in the market and I believe it makes sense for 8x8 like any other business to have Some of their numbers by bandwidth and some within Intelliquent and dual sources and plays out against each other. I think that's going to happen in any big market. All right. Thank you. Thank you very much. Our next question comes from the line of Ramiel Khoria from SEB. Thank you, operator. Thank you guys for taking my questions. First off, a or a few follow ups really. First off, on sort of the replication of, let's say, the infrastructure of the product offering outside of the U. S, could you sort of elaborate a bit on How feasible a connectivity replication of The infrastructure would be outside of the U. S, I. E, how difficult would it be to gain operate relationships or network As if we allow network connectivity and do this outside of the U. S? Well, I want to stay away from the details here because obviously, We needed to put that plan together, together with Intelliquent. But if we take a step back, what we're doing here, we're kind of Entering the voice market, we put the cornerstone investment in a cornerstone company, one of the largest U. S. Largest voice payers on the planet is in Cinch. Together and we will use this vehicle to put our strategy in place should we go international, how aggressive should we go, etcetera. We have not made up of those plans yet, and we will obviously use the vast knowledge of the voice business from the people we get in here. We got like 600 Voice Experts to set that plan. So I'm not sure I can answer. I can have a theory, but my intelligence of the answer is going to be 10x better when I can join forces with 1 of the biggest voice players. So but from a macro perspective, yes, of course. I mean, what they do, a very large portion can be replicated. Do I think we can get operator connections in other markets? Yes. There are many ways which you can do this interacceleration if you wanted, And we will run that from the Intelliquent business. So see Intelliquent, they will operate as a business unit within Cinch and they will get the task to how do you make this interactional. And they will put together a plan for that depending on what makes sense for a good business case or a good rollout with all the tools that we have in our toolbox. And that's how I would see it. So definitely possible Details exactly what and how I need to come back with. But the strategy here is, place a cornerstone that has the capability and the background and experience to do just that. I'll come back and ask the same question in a year then. Yes, there. Just perhaps a more obvious question. Could you elaborate a bit on Growth rate accelerations on the back of the OpEx investments you intend to make. I mean, what sort of timing are we talking about? Difficult to answer, but what's your sort of base case here? I mean, we're not making forward looking projections, right? So therefore, I can't talk about timing because that's hard. But I think from an owner perspective, and mind you, I mean, the people making these deals, they're Practically all owners. This is our kind of founders and they are the ones evaluating to make this deal. They're kind of in the same boat as you are. I think the logic is looking at Bandwidth, looking at Twilio, looking at voice other voice players operating the CPaa space, they have a much lower they have a very solid growth rate on enterprise. If not, we now are the biggest voice connectivity players, it sounds very logical to add investments on to the CPaaS layer to complement that as well. And if you own both connectivity and CPaaS and can combine that, you should be a very strong player in the market and you should be able to get to the growth rate that other players in the market get to. I mean, the logic is that obviously, we thought more about it. But at a top level, the logic That's straightforward. Exactly timing, I don't know. And I think it's maybe a little bit less interesting. I think they Do the logical things, execute them well. If you do in a good market, if you do that, then you should get to market rate growth. If that's 1 quarter earlier, 1 quarter later, maybe less actually interesting on the macro picture. Clear. Final one for me then. Just on the topic of sort of customer relationships here. I mean, I think we all can appreciate that there is some cross Selling between CPaaS providers across different products. But have you sort of considered the risk of losing any other CPaaS provider, which is perhaps strong on the messaging side now that you're becoming a supplier to big Inside now that you're becoming a supplier to big competitors and sort of has that taken into consideration here? Yes. That's been one of the things we consider in the DD. We made business cases and we looked at these things. But at the outset, I think, at 1. This business we're used to buying and selling from each other. I mean all this, but we have a lot of our competitors as customers and we serve them as customers in a good way on MesserLink already. So this is not a new relation and we will do that the same way. We'll honor and be a good provider to whoever wants to buy our services. And we'll continue to do that. And with that kind of honesty and straightforwardness, Typically, it works out basically. Then obviously, the alternative, If there is a big customer there that wants to move, the alternative is obviously to go to bandwidth. But That's the number one alternative. And that alternative is also competing with them, also offering these type of services. So That alternative, is that really what you want to do? And then the third alternative is to go to a Tier 2 player in the market, which may give you less good services, less good reach, which would compromise your SIPAS offerings. So that may not be the best deal. And the number 4 alternative to build this yourself, I think it's cost prohibitive to go in and try to build a voice network in the market at this stage. So the empty barriers is too big to do that. So I don't know. We will be very honest. We'll serve all the customers. We'll be straightforward and they have to make their own decisions. But I think it makes sends to work with the biggest and best providers of voice connectivity if you want to offer good XIPA services. It's very clear. Thank you, Oscar. Our next question comes from the line of Fredrik Liefel from Danske Bank. Thank you. Thank you for taking my question. I just wanted to see if you could elaborate a little bit more on the CPaaS and IAA. You described that it's 52% 48% of gross profit. But can you talk about sort of the growth Metrics of these two units and how you foresee that they will develop in those characteristics. Thank you. So Thomas, do you remember that? Yes. Thank you. Yes. So I think what we say in the release, I would say the overall growth has been around 11% over the past 2 years with the CPaaS segment growing nearly twice as fast. Of course, with these two parts being almost the same size, right, that gives you an indication also of how the other half is tracking, right? So Overall growth 11% with 1 half growing nearly twice as fast. Okay. Thank you. Our next question comes from the line of Andreas Marco from Berenberg. Hi, everyone. Congrats on the deal and thanks for taking my question. So it's a general question on your M and A appetite for the rest of the year. So you obviously closed quite a few deals in the past year. And after today's deal, what's your M and A appetite for the rest of the year? Are you Going to focus on integrating those businesses? Or do you still intend to proceed with more M and A for this year? So it's a very good question. It's a hard question to answer. We don't give forward looking projections, and we can't speak about future M and A, of course. But We have an active M and A agenda. But obviously, we need to think about integration, and we can't overrun the organization. That's And I think the market is big. There is plenty of opportunity from a financial or from a good deal perspective, and I think the limiting factor is the integration capacity. Now if we look at this deal, it's very good from an integration perspective because One, we will run it as a business unit. So it's less integration than a text messaging deal. 2, it is you got a 9 month or 6 to 9 months before closing because there is this regulatory approval. So you can plan pretty well on staff up teams to do it. So I think this is actually a less taxing integration than most other deals due to these two factors. But obviously, I mean, we have done a lot of deals. We need to think about the integration, and that's also why we start up. We now have a deeper integration reporting directly to me, who has a relatively large team was churning through and doing the integrations to the previous deals. And as we get more and more kind of done, integration or M and A update obviously increases. What we do, we will look at each specific deal and look at, all right, can we do this? How does it look? Do we have capacity? Don't we have capacity? But generally, we still have an active M and A agenda and with careful consideration of the integration capability of the organization. Okay. Thank you very much. There are no further questions on the line. Please continue. Thank you. I think we have one question from the conference call, which I think might for Roshan to answer perhaps. I believe the question is, congratulations to this deal. It looks like the Acquisition price has been very favorable to Cinch. Why did the seller not ask for a higher price? Thanks, Michael. Borja, do you want to have a stab at that? I got the interesting one. Yes, I mean, again, Thomas, a little bit To borrow from Thomas' comment earlier, every deal is unique and has its own rationale, of course. And We're looking to make for us, the most important thing here has been, of course, the strategic fit And what we can do together with Intelliquent in terms of expanding our addressable market, in terms of providing a Fantastic service and product offering to our customers together. And that's really driven the acquisition. I think, sure, there's also other factors that affect price, including competition, and that's sort of quite natural. We're very proud over our strategy, which essentially builds on a super network, a high quality of service. And what we saw in Intelliquent is that they have focused as well on investing in their network, building a Tier 1 high grade network and that connects or that reaches about 95% of The American of the population in the U. S. Have a high focus in quality, super impressed with the Intelliquent team that we have interacted with in this process. And there's a great fit in terms of our business. And I think that's a little bit What sets us apart in terms of our strategy and what potentially sets Intelliquent apart from its competitors in terms of their strategy And what unites us both and therefore might have affected the competitive position, of course, and therefore the price. But that's a lot of speculation. No. And if I complement this a little bit, I think it also depends on your perspective on market, right? If you target to be one of the 2 leading CPaaS players on the planet, your ability to do something with and do this integration with AmExiting and all that, that's much, much higher than if you're a stand alone voice player. And if you're a standalone voice player trying to invest yourself to catch up with players like us or at Twilio or a bandwidth may be a daunting prospect, right? That's hard. You've got to be pretty bold to do that. While if you're Cinch, it's very, very natural and you have a base to stand for. So I think it depends very much on the perspective that you're taking and are you willing to take That risk and I think that would be a high risk gain for any standard non player, while it's a very logical game for a player like us. So That's probably a portion of the reason without speculating on the sellers' objectives and motivations here. All right. Thank you very much for that. And I think with no other questions on the line, Thank you everyone for listening and I'll hand the word over to Oscar for concluding remarks. All right. Thank you, Thomas. So Again, I mean, the bottom line for me, we're very, very happy with this transaction, very logical to complement the CPaaS offering with being very strong in invoice. To us, that's logic number 1. Logic number 2, choose the U. S. As the biggest market and the market with the biggest overlap between messaging and voice in the short term. So that's also very logical. And then the target as such to get required the leading player in connectivity. It's also very now very, very logical in this type of transaction. So That is said that's kind of as straightforward as it is, and we're very happy to add the entire Intelliquent, the strong Intelliquent into our business. And everyone I talk to in Intelliquent, obviously, on the management day of Eddy has been very motivated by this transaction. So I'm really looking forward to a good transaction here and with a large amount of works that we have to perform. And we'll have time to thank you all.