Sinch AB (publ)

Thank you, operator, and welcome everyone to this Q1 earnings call with CinchAB. My name is Thomas Heath. I'm Chief Strategy Officer. And with me today, I have our CEO, Lorinda Pang, and our CEO, Roshan Saldana. This time, we're also joined by Sean O'Neill, our Chief Product Officer, who will share some of our plans around the product portfolio. And with these opening remarks, I want to turn the work over to Lorinda.

Thank you, Thomas, and welcome to everyone on the call today. Let's quickly review slide two. Finch is pioneering the way the world communicates. Our scalable cloud communications platform comprises assets that cross all channels, including messaging, email, and voice. With over 150,000 customers around the world, during the past 12 months, we have enabled more than 800 billion customer interactions And we have generated twenty eight point six billion in net sales nine point six billion in gross profit and three point six billion in adjusted. Slide three please. We are executing against our expectations in the first quarter. Gross margins rose due to a shift in our product mix as our higher margin continue to show healthy growth rates in Q1. Gross margins were 34% compared to 32.6% last year. Our EBITDA and adjusted EBITDA margins remain stable at 11% and 12% respectively. And net debt to adjusted EBITDA was two times for the quarter after paying down 615 million krona in debt. Operating cash flow was strong at 553 million krona in the quarter. Cash conversion for the last 12 months was 42%, which is well within our target range of 40 to 50%. Organic gross profit growth came in at 3%, roughly in line with our expectations, but below our long-term aspirations, which brings me to Cinch's growth acceleration agenda. You know we launched the new operating structure January 1st and have organized our work in three areas, go-to-market transformation, product integration, and operational excellence. You'll hear more about progress in each of these areas, but I would highlight that we have committed to 300 million krona in gross savings in OPEX on a run rate basis by the end of 2024. This is progressing well and according to plan. We also said we would incur 300 million krona in integration and restructuring costs in 2024. During the first quarter, we booked 67 million in costs, of which 18 million was due to restructuring. As we've said previously, we expect to reinvest these savings into initiatives that accelerate our growth. Turn to slide four, please. Effective January 1st, we now operate the business on a regional basis, and our reporting segments reflect this change. We recognize this will take some time for everyone to adjust and hope you were able to listen to the call with Russian and Thomas on April 16th, where they walk through the translations from the old to new segments. Americas, led by Julia Frazier, is our largest region. It comprises North America and Latin America, and in 2023, generated 63% of our gross profit. EMEA is led by Nicholas Mullin, And in twenty, twenty three, the region generated twenty two percent gross profit. Finally, a pack, which is led by Wendy Johnstone generated fifteen percent of our gross profits in twenty, twenty three. Complementing the segments, we are also providing visibility into our three product categories platform. applications, and network connectivity made up 52, I'm sorry, 55, 22, and 23% respectively of our gross profit in 2023. In a moment, I will ask Sean O'Neill, our Chief Product Officer, to provide more detailed insight into what each of these categories mean for Cinch and our customers. At the highest of levels, Creating a single global product organization has allowed us for the first time to establish a holistic Cinch product strategy. Finally, we are reporting adjusted OpEx by function. In 2023, 49% of our OpEx was spent on R&D, 29% on sales and marketing, and 22% on G&A. Next slide, please. In the first quarter, organic gross profit grew in the Americas by 4% year-over-year, driven by strong performance in applications growth of 12% and API platform growth of 16%. Network connectivity gross profit declined year-over-year by 19% due to 8YY reform, lower carrier demand invoice, and increased network costs. Next, EMEA's gross profit on an organic basis was down 5% year-over-year, driven by a 15% decline in API platform, mostly due to SMS, as we stepped away from some high-volume fixed-price contracts. On the other hand, in EMEA, applications grew 10% in the quarter, and network connectivity grew 27% on a relatively small base. In AsiaPac, we had a strong quarter with 9% gross profit growth on a constant currency basis. This was primarily driven by applications growth of 7% and API platform growth of 10% year over year. As you've heard us say previously, we're excited by and have been into NCS for some time. On slide six, I'll bring forth another customer use case we just published in Q1. Shown on this slide is a campaign run by Micromania Zing, who retails video games. They have seen some tremendous results when using our RCS products to drive customer engagement. RCS delivered an 86% higher read rate compared to newsletters and a 120% higher redirection rate to Micromania's website compared to Rich SMS, which is a product that combines SMS with a link to a landing page. The campaign was run in France, which is a leader in RCS adoption due to the high proportion of Android smartphones amongst consumers. We continue to see growing interest in RCS, not least in the Americas, and are readying our teams and systems for an expected increase in late 2024 and future years. Before I invite Sean to share more details on our new product framework and categories, let's look at slide seven. We have shown healthy gross profit growth in both our applications and API platform offerings. On a constant currency basis, gross profit has grown by 11% in applications and 8% in API platform. Collectively, they now contribute 80% of Cinch's gross profit, whereas last year they were 75% of gross profit. At the same time, the network connectivity category has declined by 15%. Russian will cover this in more detail. But with these insights, we are being more intentional in how we allocate resources to manage both the opportunities for growth, as well as how we optimize parts of the business that are under structural pressures. Slide eight, please. I'm really pleased to introduce Sean O'Neill to you. With over 30 years of cloud marketing and communications experience in markets ranging from Silicon Valley, New York to London, Sean joined Cinch in late 2022 to lead the former SMB business unit. You've seen the very strong performance of that business unit throughout 2023 under his leadership. Sean is a strategist, a strong collaborator, and has been working on integrating various product offerings in our SaaS portfolio. I'm so pleased he is now leading our global product organization as chief product officer as of January 1st this year. Now I'd like to ask Sean to share his thoughts.

Thank you, Lorinda. It's a pleasure to join you today to discuss our product portfolio and some of the progress we're making to deliver even more value for our customers. Moving on, please. So let's go to slide 10 here. Slide 10 shows our updated product categories. Our largest offering, which contributes more than half of our overall gross profit, is our API platform. These products enable businesses to draw on the full capabilities of our customer communications cloud with just a few lines of code and trigger digital communications from their own business processes and workflows. It's designed for ease of use and built for scale, offering truly global reach with a wide breadth of communications channels. These product strengths have earned us the trust of some of the world's largest and most demanding companies. who all rely on our platform to deliver mobile messages, connect voice calls, and send email. Now built upon the API platform is our applications offering. Just like the API platform, these products enable businesses to deliver personalized communications at scale using the channels that their customers use and love. But where the API platform caters to developers, our applications are targeted directly to the end business users. We know that efficient digital communications are critical to deliver a great customer experience, and our applications offering allows us to expose our breadth of communications to a much broader set of customers. I'll talk more about our applications in a moment, but I first want to introduce you to our third product category, which is network connectivity. Unlike our other products, This offering specifically targets telecom operators with voice and SMS interconnection services and software. Since these products are in a more mature stage of the product lifecycle, we need to manage them differently and place more emphasis on profitability and cash generation. The largest part of the offering relates to voice interconnect in North America, where we operate the largest independent voice network in the United States and carry more than 300 billion voice minutes per year. Now let's turn to slide 11 to give a little bit more color around how we will market these product sets. As you know, the cinch that we are today builds on the legacy of multiple acquired businesses that were all tremendously successful in their own field. This background of specialization means we have tremendous depth, both in terms of knowledge and capabilities, in each of the main communication channels that businesses use to communicate with their customers. We own our full tech stack across messaging, voice, and email and have hundreds of direct carrier connections that improve our delivery, quality, and unit economics. However, we can do much more to showcase the breadth of our offering to our customers. We know that our customers would like to buy more than one product from us, and there are ways to make it easier for them to do so. So our new product categorization accomplishes this by focusing on our customers and their different characteristics rather than on the specific channels they consume. And to make them a little more appealing, from our customer's perspective, we're introducing some new brand concepts as we unify the product portfolio. So our inter, sorry, our network connectivity offering will be branded Cinch Connect. We're offering components and services that allow other businesses to build, excuse me, a name, Cinch Connect is a name that captures the essence of our offering to telecom operators. In the middle is our API platform, which is used by developers. This will be branded Cinch Build. Now we're offering components and services that allow other businesses to build great products of their own and to build strong relationships with their customers. And at the top for our applications, we will use Cinch Engage, which is a brand that we already today use for certain products. And collectively, these three parts together form our customer communications cloud. Now let's turn to slide 12, where I want to share how we are progressing with product integration within our applications portfolio. And as you're aware, integration of our products is a strategic priority and a key component of our overall growth acceleration plan. Outlined in this slide are some of the software as a service offerings that are included in the applications category. As you can see in today's report, these are very well performing businesses with high growth rates and healthy margins. The largest revenue contributor is message media, which has a very strong position in Australia, New Zealand, and the US. is particularly popular with mid-sized businesses who appreciate its ease of use and its many integrations with leading cloud-based CRM, e-commerce, and finance systems. Today, it's primarily used for SMS messaging with some 40,000 customers using the product and growing. Also focused on SMS is simple texting, a product targeted to smaller businesses in the U.S. It's highly automated and very easy to understand and use. It really showcases what product-led growth is all about. Now, simple texting is often used for marketing, which is also why customers turn to our Mailjet product. You may recall that we have two email products, Mailgun and Mailjet, where the former is more focused on developers and is part of our API platform. Mailjet targets business users. specifically marketing teams, and offers a very capable yet straightforward interface to design and deliver great emails that render well on any device. And lastly, I want to call out Cinch Engage, our software focused on business messaging through chat apps like WhatsApp, Telegram, and Instagram. This is an area of great promise and potential. where we truly do pioneer the way the world communicates. And the feature set is particularly relevant now as RCS gains momentum and creates new interest in conversational messaging. We're very pleased with the performance of these products, both in terms of growth and profitability. That said, we think we can make our offering even more attractive by tying these products more closely together. For although there are differences, there are actually many more commonalities. These products all support use cases across marketing, operations, and customer care. They all help remove complexities from communications. And they all benefit from the technological advancements that are now being unlocked by AI. And most importantly, they are all used to service customers in an environment that is increasingly omnichannel. Now let's turn to slide 13, which outlines our plans ahead as we look to further strengthen our applications offering and combine these capabilities. As shown on the slide, we will bring over the capabilities from Mailjet, Engage, and Simple Texting into the larger message media platform. This significantly expands the capabilities of the target platform and allows us to deliver even more value to our customers. The message media product will eventually be renamed Cinch Engage and be our lead SaaS product for multi-channel AI-powered customer engagement. Some of the existing products will be decommissioned once customers are migrated, while others will continue to be sold standalone. And importantly, we can still use a common and more cost-efficient technology stack across the application's portfolio. We're excited about the possibilities for cross-sales and upselling that this development effort will unlock. Products that are currently restricted to select geographies will now be offered worldwide, and current customers will see incremental benefit as we broaden and combine some truly best-of-breed products. And to maintain a positive customer experience, my great work happens in stages and follows a proven integration methodology. We first build to feature parity, then transition individual customer cohorts, and then using A-B testing to validate performance. I look forward to briefing you again as we progress with these plans and create uniquely capable and highly differentiated offerings. And with those words, I want to hand it over to Roshan, who will guide us through this quarter's financials.