Sinch AB (publ)

Hello everyone and very welcome to CIMS Q4 2025 presentation. My name is Minara Dander and I'm Head of Investor Relations and Sustainability. And with me here in the room today, I have our CEO, Linda Pang and CEO, Jonas Dahlberg. So today you will hear Lorinda and Jonas present the quarter, and thereafter we will have time for questions. To ask your questions, please push pound key and five on your telephone keypad. But I'll come back to that again. So once again, very welcome, and I hand over to you, Lorinda.

Thank you so much, Mia. And thanks, everyone, for joining us today. 2025 was a year of disciplined execution where we achieved record high profitability while regaining our growth momentum. The fourth quarter marks a strong finish to the year, and I'm pleased to report another period of continued organic gross profit growth and improved profitability. Let's turn to slide two to look at the highlights from the quarter. The fourth quarter shows that we are firmly on the path to regained growth, with solid momentum in our largest businesses, the Americas, and our API platform, which was partially offset by headwinds in EMEA and APAC. We are closing the year with record high profitability. Gross profit grew 3% organically, and our gross margin expanded by 2 percentage points to 35%. Combined with our disciplined cost control, this resulted in an adjusted EBITDA margin of 14%, an increase of one percentage point year over year. And our cash conversion for the quarter was a solid 84%. Finally, we continue to return value to our shareholders. We have now repurchased 8.8% of our outstanding shares, and we have called an extraordinary general meeting later this week to seek approval for canceling these shares. This cancellation is a strategic step as it will enable the board to decide on additional buybacks within the 10% limit until the 2026 AGM. Please turn to slide three. Our performance this quarter and throughout 2025 is a direct result of our strategy built on three pillars, reaccelerating growth, expanding our EBITDA margin, and active capital allocation. Our focus on healthy product mix, commercial discipline, and operational efficiency is driving our progress, and we remain firmly on track to deliver our midterm financial targets. Now, let's look back at the full year on slide four. When we put that strategy into perspective, you can see on this slide that 2025 was the year our disciplined execution has placed us on a strong trajectory toward our midterm goals. We achieved exactly what we set out to do. We rebalanced regaining our growth momentum while simultaneously delivering record high profitability. This performance was powered by solid development in the Americas region and in our API platform products. I'm pleased with the progress we are making towards our key financial targets. And in fact, with an adjusted EBITDA margin of 14% this quarter, we have already reached our target range that we set for the end of 2027. With gross profit growing 4% organically year over year, we are firmly on our way towards our 7% to 9% year-on-year financial target for the end of 2027. And we continue to be focused on building a resilient and sustainable business through diversifying our customer base, winning in next-generation messaging and email, as well as improving our commercial terms, which supports top-line revenue growth and continued profitability. Also, our performance is being recognized externally. We were named a market leader by both IDC and Rocco. For the third consecutive year, Gartner named Cinch a leader in its magic quadrant for CPaaS, which is a powerful validation of our global reach, competitive position, and consistent platform leadership. On slide five, you can see our progress on our growth priorities. Our progress is anchored in a clear strategic framework built around four growth drivers. I will briefly touch on each of them here and then go deeper on selected areas in the following slides. The foundation of predictable, high-quality growth comes from four core drivers, as I mentioned. Our enterprise customer base grew a consistent 5%, with leading brands such as Google and Albertsons among the top contributors to gross profit growth. At the same time, our high-margin self-service products delivered another stable quarter of 10% on a year-to-date basis. Building on this stable base, next-generation messaging is an important growth driver. Adoption of RCS continues to increase, with volumes growing 260% year-over-year. Customers, including PayPal and OneMain Financial, ranked among our top 10 customers by volume in the fourth quarter. Finally, we are expanding our Partners in Ecosystems channel, which serves as our strategic gateway to the AI economy. This includes signing new, innovative AI partners such as Lovable. In parallel, we are also deepening relationships with established global leaders across our ecosystem. A strong example is Adobe, where we closed several significant deals in the fourth quarter. Now let's look closer at the quality of our enterprise customer base on slide six. This chart clearly illustrates a key strategic achievement. We are building a more diversified and resilient customer base. Growth is increasingly driven by a broad set of enterprise customers beyond our top 10. This deliberate shift reduces our exposure to highly competitive, lower margin traffic and is a key driver behind our margin expansion and improved earnings quality. At the same time, it's important to note, though, that this is not a story of substitution. We continue to maintain our strong and stable position with some of the world's largest CPaaS customers who rely on our global network and platform for their communications. We are simply layering on new, high-quality growth. Let's turn to slide seven. Our market leadership is now translating into strong and accelerating commercial momentum, particularly in our largest market of North America. This is not a coincidence. It's actually a result of the deliberate changes in our go-to-market strategy and operations that we put in place last year. Those changes were focused on creating a more disciplined, accountable, and effective commercial organization. We started by aligning our entire commercial team around a segmented operating model to focus our resources on the highest potential customer tiers. This strategic alignment was underpinned by true operational rigor, including a significant simplification of our job architecture to create clearer roles and accountability. That structural clarity is brought to life by a culture of high performance. We radically streamlined our sales compensation plans, which have directly led to improved quota attainment and integrated tools like our new CRM to establish a disciplined, data-driven business cadence. The results of this transformed approach are clear. In the fourth quarter alone, our team delivered significant wins, including securing a seven-figure multimillion-dollar deal with a leading HR software company, expanding our partnership with a leading hotel chain to over 100 countries, and landing a seven-figure voice deal with a large U.S. health insurer. These are not just isolated victories. They're actually proof points of a strategic transformation that is delivering sustainable, high-quality growth. Let's turn to slide eight. Our leadership in next-generation messaging is a key pillar of our growth, and nowhere is this more evident than with RCS. We are at the forefront of a major technology shift with our RCS volumes in the fourth quarter increasing by 260%. The driver is simple. RCS delivers better outcomes because it changes what messaging can do. It turns one-way notifications into rich, interactive experiences that can generate up to 10 times the engagement of standard SMS, translating into higher conversion rates and stronger ROI for our customers. But here's the most exciting part of this for us. Despite this incredible growth, RCS still accounts for only 3% of our total messaging volume. We are in the early stages of a multi-year technology shift, and capturing this transition from SMS to RCS is a significant and durable growth tailwind for Cinch. When our clients see a step change in engagement, they don't just send more alerts. They create entirely new conversational journeys. This expands their total interactions and spend on our platform, delivering, driving revenue growth. At the same time, enabling these higher value interactions embeds us as a strategic partner, and that strengthens our customer relationships, reduces churn, and increases lifetime value. Let's turn to slide nine, please. Our strategy for winning in the AI economy is built on a proven playbook. Since our founding, Cinch has been the communications backbone for the major technology shifts from mobile to the cloud. And we are a key part of the tech stack for leaders in each of these eras, and we are now the indispensable backbone for the AI era. We are the trusted execution layer within the AI ecosystem itself. We are embedding our technology with both established AI leaders and on platforms like our new partner, Loveable, where the long tail of new AI-native businesses is being born. This strategy creates an incredibly efficient growth engine. It allows us to capture the next wave of agent-driven communication volumes at its source, building a durable strategic moat for the decade to come. We are ensuring the next wave of global innovation runs on the Cinch platform. So as I hand the word over to Jonas to take you through the financials and details, let me summarize quickly. We have delivered a strong year of profitable growth as a result of delivering value to our customers and partners and by executing with discipline. We're confident in our strategy and our ability to continue creating value for our shareholders. Thanks for listening here today, and I look forward to taking your questions shortly.

Thank you, Lorinda. Without further ado, let's get into the numbers. So let's flip to page 11. So as in previous quarters of 2025, we faced strong FX headwinds in the fourth quarter, actually pronounced headwinds. And the negative FX impact was minus 10% on net sales and minus 11% on gross profit. Adjusted for FX, we have a reduction on organic revenue, mainly driven by reduction of low margin contracts. But combining this also with a positive mix shift, this yields a continued positive organic GDP growth of 3% in the quarter, at a similar level to the 4% average we've had throughout the year. The Americas is the engine, so let's look at that in more detail by flipping to the next page, 12. So, Americas is our most important region by size. It's more than 60% of our gross profit and is the group's growth engine in the year and in the quarter. Americas delivered 7% gross profit growth with a three percentage point increase of the margin to 36%. And what's also great to see is that the largest business we have in America is the API business with enterprise messaging and email is the main contributor to growth. The growth in the API business was strong and outpaced the decline we've seen in verification with email and messaging. Also, network connectivity shows stable underlying performance. What's important, though, to understand here about network connectivity is that in Americas, we have a hit on the revenue of approximately 60 million related to a traffic dispute with a customer. At the same time, we have a positive contribution for almost the same amount, completely unrelated in API platform related to traffic fees from a supplier. Combining these two, the effect on America's gross profit and group gross profit is nil, but you'll see some movements between the segments. Moving over to EMEA, we see a strong growth in applications, also the core part of API messaging grew strongly, but we continue to face headwinds from the fixed price contracts in EMEA. These contracts are being phased out to, well, material being phased out, and as of the end of the first half, we expect no impact from continued phased out of these contracts. In APAC, we have strong growth in the API business, except continued decline in India and also some competitive pressure in Australia. So it looks like a mixed bag, but the important takeaway here is the most important business we have, which is on the regional level, the Americas, on product categories, being the API business in email and messaging, they are doing very well. So let's flip page and look at what's happening on margins. It's actually a record high delivery and we have continued improvement of margins in the quarter. We have strong gross margin of 35% and for year the highest gross margin in EBITDA so far. We've already covered, actually, most of the important drivers. It's about mix shift on product level and reduction of low-margin contracts, and combined this drives this very solid and continued gross margin expansion. On the EBITDA margin side, also what contributes is disciplined cost control and continued synergy extraction. Real quick, flip to page 14 to look at the cost development. So here the nominal numbers shows actually a decline of OPEX with 8%. But also here we have FX effects at play. But if we adjust for the FX effect, we still have a very disciplined development of cost with only a 1% organic increase of OPEX. Combine all, we have an organic growth of EBITDA of adjusted EBITDA of 6%. And we have an even higher improvement of non-adjusted EBITDA. What we have here is last Q4, a 700 million provision on indirect taxes in the fourth quarter. Moving over to cash flow, that's on page 15. Super strong cash conversion, seasonally strong quarter, 84% cash conversion. That's free cash flow of 1.5 billion over the last year. And that's a 40% cash conversion. It is within our guidance range of 40 to 50%. Important to remember last year we had 60% cash conversion. Now it's 40%. If you look all the time, our cash conversion is 50%. But we have some working capital swings. And you can see that in the cash flow on the right hand side of this chart. But just to prove the point that you shouldn't be concerned about this, it's more normal swings, we turn to page 16. As you can see, working capital here, net working capital is still in a favorable position. That means we have a negative working capital. And what you see here in the quarter is a seasonal increase in payables that contributes to a positive cash release. So in a nutshell, some swings between quarters, but truly continued solid working capital. Turn to page 17, looking at leverage. We're still at a solid 1.6 times leverage. This is a slight increase from the trough in Q2, driven basically by the share buybacks we've done. We bought 62 million shares during this period for close to 1.9 billion. In addition, we bought shares through an equity swap arrangement of 364 million on top of that. Still have 3.7 billion available in use in credit facilities that we can use for general corporate purposes, such as buybacks. Now, to the topic of buybacks, move to page 18. So, back to our strategy. It is to have an active capital allocation strategy. We have returned cash to shareholders through the buyback program. So in the 2025 AGM, we got a mandate from the AGM, or the board got a mandate from the AGM to buy back 10% of the shares. And that started after the report of the second quarter. And then we have stepped up fresher shares to first 1.8 percent end of Q3 to 7.3 percent at the year end. And currently we hold 8.8 percent. With this background, the board of directors have convened an extraordinary general meeting for shareholders on Thursday to vote on cancellation of the existing treasury shares and a positive vote would enable an additional 10% buybacks until the ordinary AGM in May. And the question is obviously then, you know, how much shares can we buy back? I'd like to first be clear that the board will at every point in time decide what they think is in the best interest of the shareholders. So this is more an illustrative example. But we've had an average free cash flow conversion of 50% over the last few years. And with the current situation, we can easily buy back 10% of our shares per year. Add on top of that our current GDP growth rate and our existing margins, we can more than double profit per share in five years. And this is what I would call the bedrock case for Cinch. And on top of that, obviously, as we step up towards our organic GP growth target, this can be even more favorable. So with this background, the board of directors believe it's in the shareholders' interest with flexibility for accelerated buybacks. So just before we open up for Q&A, just to remind you about our strategy on page 19, we will continue to execute for growth, reacceleration, continue working with our profitability within the target range, and then active capital allocation, including share buybacks. And with that,