Sinch AB (publ)

Welcome to CINCH Q3 2025 report presentation. My name is Mia Nordlander and I'm Head of Investor Relations and Sustainability. With me here today, I have our CEO, Lorinda Pang, and our CFO, Jonas Dahlberg. We will hear them presenting the quarter and thereafter, there will be time for questions. To ask your questions, Please dial in and remember to dial pound key five on your telephone keypad. So once again, very welcome to this presentation.

I hand over to you, Lorinda. Thank you, Mia. And thanks everyone for joining us today. One year ago at our first CMD, we shared a strategy for value creation. And today marks a clear milestone of our disciplined execution and value delivery on that strategy. Let's turn to slide two to look at the highlights from the quarter. As we begin, I will remind you of the continued large FX headwinds in the quarter, mainly due to a weak US dollar. As we always do, we will point you to organic changes, which normalize these swings and are a consistent representation of the underlying business. I am pleased to report a quarter of continued organic gross profit growth, improved profitability, and the initiation of our shared buyback program. We delivered solid performance that demonstrates focused execution against our strategic priorities, even though currency effects obscure some of the underlying momentum. Gross profit of 2.3 billion krona grew 5% organically. year over year and roughly in line with last quarter. We expanded gross margin to 35%. Both the gross profit and gross margin development are a testament to the strength of our offerings and our focus on higher value interactions and more profitable product lines. Our ability to expand profitability in a dynamic market highlights the resilience and efficiency of our business model. However, turning to the top line, net sales were flat year over year at 6.7 billion krona. And I want to be direct about this. While our profitable growth is very positive, this level of revenue is not what I expect, nor is it the shape of the growth we are aiming over the long term. I'll address this further on the next slide when we break out the regional segments. Adjusted EBITDA of 915 million krona increased organically by a strong 8%. This was an adjusted EBITDA margin of 14%, which was the highest on record since 2019 and was driven by gross profit growth and operational efficiency. As a reflection of our confidence in our strategy and financial strength, Cinch initiated its first ever share buyback program during the quarter, with 1.8% of shares now held in Treasury. Beyond the financials, we are proud that Cinch was named a leader in Gartner's magic quadrant for CPaaS for the third consecutive year, a powerful validation of our market position and strategy. We also ranked number one in their critical capabilities for CPaaS report for multinational organizational use cases. This highlights the strength of our platform's ability to meet the complex needs of global enterprises. We also strengthen our position in AI during the quarter with leading innovators across all regions adopting our API products to power customer engagement, underscoring the scale and robustness of our platforms. And in an important milestone of conversational messaging, we launched RCS for Business with all three major mobile operators in the US, cementing our leadership in this transformative channel. Let's look at slide three next, please. To begin, let me provide some color on the flatness in net sales. This primarily reflects two factors. First, we've encountered competitive pressure in the traditional messaging space concentrated within a few large accounts in the America's customer base and in the India market more broadly. Second, we have continued to steer away from fixed price contracts that have negatively impacted EMEA and to a lesser extent, Asia-Pac, as these opportunities do not fit an acceptable risk profile. However, we're not standing still. We are proactively reshaping our revenue profile for more sustainable long-term success. This strategy is twofold. First, diversifying our customer base, and second, accelerating our leadership and conversational messaging. We are making excellent progress on customer diversification, having recently secured several notable new enterprise clients who are in the early stages of ramping up their volumes. While their full contribution is not yet reflected in our top line, they represent a significant driver of future growth. And the key reason we are winning in our leadership is our leadership in conversational messaging. We grow here by winning new customers directly onto modern channels like RCS and WhatsApp and migrating our existing base to these higher value interactions. In India, for example, This combined success in over-the-top channels and strong growth in email has neutralized the pressure on traditional messaging. In the Americas, while net sales were flat, the region delivered strong organic gross profit growth of 8%, with margins expanding by 2 percentage points. This was driven by a strong turnaround in our U.S. network voice business and solid performance in other product categories. In EMEA, organic net sales and gross profit declined by 2% and 3% respectively. This was primarily due to the strategic decision I just mentioned regarding steering away from fixed price contracts. Notwithstanding this, the underlying API business remains healthy and is growing. And in AsiaPac, organic net sales grew by 7%. Organic gross profit increased by 1%. The strong net sales performance was driven by new large messaging wins, but was offset by competitive pressure in applications in Australia and the India SMS pressure I mentioned earlier. We've been experiencing this downward pressure for some time, but Cinch India has now stabilized sequentially. Before we leave this slide, let me reiterate. The actions I mentioned, diversifying our base, leading in next-gen messaging and email, and improving our commercial terms, these are fundamental to building a more resilient and sustainable business. They strengthen our foundation and position us to capture higher quality growth going forward. Next slide, please. Our strategy for value creation is very clear. We are executing with discipline. It is built on three core pillars, re-accelerating growth, expanding our EBITDA margin, and disciplined capital allocation, all fueled by continued strong cash generation. The third quarter marks another period of significant progress across each of these pillars and is another firm step on our path to delivering our midterm financial targets of 7% to 9% organic growth and 12% to 14% adjusted EBITDA margin by the end of 2027. Next on slide five, let's look at the progress for growth reacceleration. The four growth drivers we outlined are deeply interconnected. In enterprise expansion, we are winning with the world's most demanding businesses. Our large enterprise customer base has increased by 5% year to date, including the addition of companies like Nespresso, Visa, Dollar Shave Club, and Nordstrom. Our self-serve products continue to be a powerful growth engine, delivering high margin, double digit growth year to date. As another proof point, our self-serve capabilities are resonating in the market. We have increased our customer count to more than 190,000. As it relates to RCS, our traffic has tripled year to date. And as mentioned in the third quarter highlights, we have now fully achieved coverage with all US tier one operators. Touching quickly on our continued strength in email, volumes have increased nearly 40% since last year. And finally, partners and ecosystems, which is all about scale. We embed Cinch directly into the workflows of the world's leading enterprise software companies. The partner-enabled business has grown gross profit by 5% on a year-to-date basis. These growth drivers are powered by two major opportunities, the growth in conversational messaging and the rise of generative AI. Let's move to slide six to take a look at our progress in conversational. We are a leader in this transformation, and the momentum in conversational messaging is a clear testament to the market's demand for richer engagement to enhance the customer experience. Our RCS message volume growth is being led by India, LATAM, and early adopter markets in EMEA, like France. And in the US, we have some great early use cases with brands like Enfamil and Omaha Steaks. We have launched WhatsApp Upscale as a complement to RCS Upscale. This is more than just switching channels. It's about delivering real business impact through better security and higher trust, improved conversion rates, and more innovative customer communications. To illustrate the last point, our customers Picard, Courier and Clarence were nominated for innovation awards for their high impact RCS campaigns. Clarence took home the win. By transforming customer communications with rich interactive messaging, their campaigns deliver much higher engagement and stronger business outcomes. Next page. Generative AI is set to dramatically amplify the effectiveness of conversational messaging. While these two phenomena evolved independently, they are now creating a powerful synergy where each makes the other more valuable. Put simply, consumers now expect conversations that are intelligent and context-aware. AI provides the intelligence to meet this demand, while rich channels like RCS and WhatsApp provide the perfect vehicle to deliver those enhanced experiences. This powerful combination is creating an exciting new era for digital customer communications. In this era, machines themselves are becoming new buyers of communications. As autonomous AI agents begin to orchestrate interactions, they will drive a significant increase in overall communication volumes. On the next slide, I'll talk about what this inflection point means to Cinch. First, we see strong market validation that we are a platform of choice. The world's leading AI innovators are building their future on our infrastructure, choosing Cinch's APIs to power their communication needs across all regions. This reinforces our unique position as the trusted execution engine. These companies need to know that when AI triggers a message to be sent, it gets delivered securely and reliably every single time. That is our core strength. our leadership in this new ai era is built on a foundation we have been laying for years we have strategically embedded ai across our product suite to make our solutions smarter more intuitive and more valuable let me give you a few tangible examples of how we are delivering value to customers today in email mailgun inspect uses ai for quality assurance and our open source mcp server allows developers to query at email analytics using natural language In multi-channel campaigns, our CinchEngage platform uses AI to orchestrate campaigns, personalize experience, and create content. In voice, Our programmable voice API allows businesses to automatically capture and transcribed conversations for compliance analytics and deeper customer insights. And in our core messaging offering Ai is deeply embedded to enable our customers to recognize intent perform sentiment analysis and protect their users from detecting by detecting profanity and spam. We are continuing to enhance our platform's capabilities and enabling campaigns and conversation orchestration. We have already seen a 41% year-to-date volume increase in conversations facilitated through our chat layer platform and are now developing AI agents directly within our Cinch Engage platform. We expect to launch a closed beta with our first customers before the end of the year. In summary, this trend directly fuels our platform's capabilities and growth. More AI adoption means more traffic generating more revenue in our existing core business. We are the essential communications layer for the AI economy, and we are well positioned to grow as it does. With that, I'll hand the word over to Jonas to take you through the financials in more detail.

Thank you, Lorinda. So let's get into the financials and we start at the top of the panel with net sales. So first, a couple of words on our financials. When looking at SINs financials, it's important to understand a couple of things. The first thing is that we have a strong seasonal pattern where there's typically the year end that's the strongest driven by the retail season. Secondly, we have significant FX effects and our reporting currency is Swedish kronor. But it's a very limited share of our business. In fact, the US dollar is the dominant currency of trade. with about 60% of the business. So there's a lot of FX effects, and that's why we always communicate organic numbers for comparability and communicate it year on year. So in the quarter, net sales came in at 6.7 billion SEC, and that's down 7% due to currency translation effects. However, when adjusting for this effect, we have a marginal positive organic growth. Now, under the surface, there's actually more excitement as we exhibit continued solid net sales growth in our high margin products, such as our email products and several of our applications. Moreover, we continue to diversify our customer base and reduce customer concentration. In all, this provides a positive mix effect and stronger financial profile, both here and now and for the future. Next chart, moving on to gross profit. Looking at organic numbers, we continued with a stable 5% growth in the quarter, with the strongest growth coming from our most important market, which is the Americas. The improvement in Americas is driven by all product categories, including our API and application business, but with a particularly strong quarter for our network business, which is now really back after the turnaround. What's positive in the quarter across the company is that all product categories contributed to organic GDP growth as well as two out of our three regions. However, on a reported basis, we have this currency translation effects and the impact is eight percentage points as a currency translation headland. Moving to our margins. Combined, we have a very positive development of our margins with a strong 34.8% gross margin in the quarter. And this is an increase of 1.2 percentage points year on year. And this improvement is driven by a combination of both increased profitability at product level, as well as a positive product mix shift. As I mentioned earlier, our most profitable product continues to grow faster than the average mix, and this is mainly our email products and application, and hence contributes positively to the higher margin through a positive product mix shift. Disaggregating these two effects, about half of the margin increase comes from a positive development of product margins, while the other half comes from a positive product mix shift. Moving over to EBITDA margins, we deliver close to record high 14% adjusted EBITDA margin. In fact, in modern Cinch time, I would say it's highest post 2019 and acquisitions within in 21, which truly transformed the company. And we also see a very strong margin on non-adjusted EBITDA. And we're already now at the upper range of our 12 to 14% EBITDA margin target for the end of 2027 that we established one year ago at our capital market stage. So in terms of the targets that we set out one year back, one is down and that's the EBDA margin target. And now it's one to go, which is really to get the gross profit growth also going. Moving to the next page to take a closer look at cost and EBDA, starting with operating expenses. We continue on our path of cost discipline and continued zoonotic extraction in the combined cinch. So OPEX is down 5% compared to the same quarter last year, which represents a marginal 3% organic OPEX increase. Measures we're taking on the cost side are about leveraging truly the combined strength of Singed, consolidating platforms and products, consolidating support functions to lower cost locations, and recently leveraging AI to gain efficiency throughout our operations. I want to stress that this is not a one off effort, but rather an ongoing effort over several years to increase our cost efficiency. And this effort will continue and there is more potential. It will both support the potential of increased profitability in line with our targets, as well as allowing for investments in future growth, predominantly through investments in sales, marketing and product development. So with an organic 5% GP growth, but only 3% OPEX growth, we get a favorable drop down to adjusted EBTA with an 8% organic improvement in the quarter. And since we have lower adjustment items, primarily through 41 million SEC lower restructuring and integration charges, we achieve 16% organic EBTA improvement compared to the same quarter last year. Moving over to cash conversion and cash flow. Operating cash flow amounted to 1.4 billion over the last 12 months, which corresponds to a 30% cash conversion rate. And this is very close to our guidance of 40 to 50% cash conversion over a 12 month period. It's important to emphasize that we have some working capital swings between quarters, but this is quite normal for us. And so I would like to say that the cash conversion rate going forward and what we report now is very much in line with what you can expect. So just to prove this point, I would like to move over to network and capital. Sequentially, we're essentially at the same level of receivables as the last quarter. And the negative impact on working capital mainly comes from lower payables in the quarter. And in fact, it's the lowest level of payables in several years. But in all, we continue to operate the business with a negative working capital, although a slight increase from the previous quarter. So while we have and we're likely to have variations in cash flow impacting quarterly, sorry, in net working capital, influencing quarterly cash flows. We don't see any structure changes impacting our working capital and stay confident with our cash conversion guidance. Lastly, before handing back to Lorinda, looking at the balance sheet, we continue to have a strong balance sheet with a net depth to adjusted EBITDA slightly increasing to 1.4 turns. And as you know, the last quarter, the VOD result activates the repurchase program mandated by the AGBM, allowing for a repurchase of up to 10% of outstanding shares. And during the quarter, we repurchased 1.8% of outstanding shares for some 519 million SEK. And in addition, we spent 241 million for an equity swap arrangement to hedge Cinch long-term incentive program. And in this program, a partner bank acquired further Cinch stock for 241 million. So in total, this corresponds to 2.7% of outstanding shares. And in combination, these are the drivers for a slightly increased leverage ratio in the quarter. What's worthwhile to mention also is that during the quarter, we also refinanced existing bank facilities at largely unchanged and very favorable terms, which means that currently have an additional 4.2 billion SEC in unused credit facilities. And with that, I'm handing back to Lorena.