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LINK Mobility Group Holding Interim / Quarterly Report 2023
3655_rns_2024-02-15_35dec2ef-3d96-4f9f-b9d5-9044d0993266.pdf
Interim / Quarterly Report
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Financial presentation
Q4 2023
15 February 2024
link mobility
LINK in short
Market leader in Europe - Global ambitions with strong growth credentials
European #1 for enterprise digital messaging
- Attracting and operating customers locally with local languages creating stickiness and upsell opportunities
- High double-digit growth over the last 4 years
Proven M&A achievements with more than 30 acquisitions
- Expanded throughout Europe from the Nordics since 2016
600 employees in 29 offices across 17 countries serving 50,000 customers
Revenue NOKm
Adjusted EBITDA NOKm
Interim Report Q4 2023
link mobility
LINK's recurring and growing business model
Solid European footprint in growing markets supported by megatrends and increased adoption rates
Recurring business with 50' customers in Europe
- Customers remain and increase their usage
Net retention rate (NRR) and customer churn (%)
Scalable business model
- Adjusted EBITDA growth versus gross profit growth
Gross profit (NOKm) – growth%
Adjusted EBITDA (NOKm) – growth%
Megatrends support digital messaging growth
- Increased adoption and traction on higher margin CPaaS solutions
Diversified use cases and industry exposure
- Resilient revenue distribution tilted towards stable notifications
Customer revenue concentration
Interim Report Q4 2023
3
link mobility
Q4 2023 highlights - Strong growth with commercial refocus
Organic growth at the high end of expectations
All-time high revenue at NOK 1 796 million
- Organic growth in fixed FX at 14%
- Strong market push related to Black Week and Christmas trading
All-time high gross profit at NOK 385 million
- Organic growth in fixed FX at 13%
- High growth on profitable OTT channels like RCS expands margins
- FY 23 organic gross profit growth in fixed FX was 7%
All-time high adjusted EBITDA at NOK 181 million
- Organic growth in fixed FX at 24%
- FY 23 organic adjusted EBITDA growth in fixed FX was 15%
- Profitability growth supported by cost reductions completed early 2023
Cash reserve NOK 3.4 billion after divestment of Message Broadcast
- Divestment of US subsidiary at highly attractive valuation closed on 3 January 2024
Leverage after close of US divestment at ~1.1x adjusted EBITDA
- Providing ample financing capacity for inorganic growth through M&A
Organic growth and FX effect
| NOKm | Q4 2022 | Organic growth | FX effect | Q4 2023 |
|---|---|---|---|---|
| Revenue | 1 423 | 193 | 180 | 1 796 |
| Organic growth (%) | 14% | |||
| Gross profit | 309 | 39 | 36 | 385 |
| Organic growth (%) | 13% | |||
| Adjusted EBITDA | 133 | 31 | 17 | 181 |
| Organic growth (%) | 24% |
Interim Report Q4 2023
link mobility
Double digit organic gross profit growth
Higher margin OTT channels drive profitabilitet
Group organic gross profit development (NOKm)
Group gross margin (%)
Enterprise segments delivering growth in the high end of expectations
- Enterprise growth of 11% YoY organically contributing NOK 32 million
- Traction on RCS in seasonally important retail quarter drove OTT volumes
- Normal seasonality with strong market push in activity across sectors
- Growth supported by improved commercial execution
Global Messaging growing 37% in line with topline growth
- Margin returned to historical levels
Positive NOK 36 million FX effect with NOK depreciation
- Reported gross profit growth of 24% to NOK 385 million
Gross margin stable YoY
- Enterprise margin expanded from positive mix towards higher value products
Interim Report Q4 2023
link mobility
Growth and disciplined capital investment policy
High cash reserves for M&A and debt reduction
High cash reserves of approximately NOK 3.4 billion – Solid headroom for acquisitions and refinancing of bond
- Current EUR 370 million bond, maturing in December 2025, net debt to be managed within 2 - 2.5x adjusted EBITDA range ahead of refinancing
LINK may consider further bond buybacks before refinancing of remaining EUR bond in 2025
- Pending market conditions and competitive implied yield compared to other risk-free options
- EUR 18 million in nominal bonds bought back in December last year and in January this year
LINK may consider share buybacks related to long-term incentive plan (LTI) share options
- Up to 17 million shares can be bought and held as treasury shares for allocation to employees share programs
- Removing dilution effect from potential future shares issues related to the LTI program
Still ample excess cash for disciplined, accretive and opportunistic M&A
- Bolt-ons in Europe main priority
- All targets to be profitable with a diversified customer portfolio and low churn
- Target valuations between 6-9x cash EBITDA before synergies pending growth momentum
- Financing structure optionality through cash, seller's credit, earn-outs and share issuance (when appropriate)
Interim Report Q4 2023
link mobility
M&A strategy for additional inorganic growth
LINK completed more than 30 acquisitions last decade
- Historical acquisitions in Europe has generated significant excess equity value
- Expertise and financial capacity to strengthen acquisition activity
M&A play-book guidelines
- Strong local market position and strong telecom operator relationships
- Cash EBITDA positive and cash accretive to LINK from day one
- Solid, well-diversified customer portfolios with low churn
- ~80% overlapping technology strong commercial enterprise focus
- Synergy potential to create further value
Many bolt-ons and several level-up opportunities in Europe have priority
- More than NOK 200 million in additional EBITDA potential from M&A pipeline in Europe
- Acquisitions in Europe will drive cost synergies and enable quicker upselling potential
- Several level-up cases outside Europe in attractive markets in M&A pipeline
Add-on
Level-up
Smaller bolt-ons to further strengthen market position and realize synergies
Acquire larger companies in new and existing markets
Interim Report Q4 2023
link mobility
New contract wins - CPaaS traction drives organic growth
New contracts wins established at higher level following commercial refocus
New agreements signed in quarter
LINK signed 745 new and expanding agreements in Q4 23
- Steady inflow of numerous smaller and medium sized contracts complemented by a few larger contracts
Gross profit contribution* from new contract wins
Q4 23 saw CPaaS solutions more than doubling YoY
- A2P contribution somewhat down on very strong Q4 previous year
- Total contract wins established at higher level
Interim Report Q4 2023
- Historically 75% of gross profit recorded in P&L within 12 months
link mobility
Recurring revenue supported by high NRR and low churn
Customers stay with LINK and increase their usage
Net retention rate (NRR) and customer churn (%)
Customer accounts ('000)*
Net retention stable well above 100%
- Supporting growth in recurring revenue
Customer churn consistently low
- Enterprise churn below 2% over time
- QoQ decrease as aggregator churn in Global Messaging out of comparables
Steady growing base of 50 000 clients
- Significant upselling potential beyond initial use-case to existing customers
- High commercial success rate in second sale (~70% win-rate)
Interim Report Q4 2023
- Customer accounts pre Q2 2023 have been corrected for inactive accounts link mobility
LINK positioned for strong FCF growth in 2024 and beyond
LINK's European business is scalable and highly cash generative
- Organic gross profit growth in high single digits historically
- Organic adjusted EBITDA expected to grow at higher rate than organic gross profit
- Net debt not exceeding 2 - 2.5x adjusted EBITDA range when refinancing in 2025
Diverse M&A pipeline with additional EBITDA potential > NOK 200 million in Europe alone
- Bolt-ons in Europe priority to realize further scale
- Several potential level-up cases in Europe and beyond including the US
Interim Report Q4 2023
link mobility
Financial review
Q4 2023
15 February 2024
link mobility
All-time high reported revenue – YoY growth of 26%
FX tailwind contributed 12 percentage points to revenue growth
Reported revenue NOKm
Reported volume (mill transactions)
Organic revenue growth of 14% in fixed FX
- Enterprise segments grew 9% organically in fixed FX
- Strong retail push in seasonally peak season
- Inflationary pressure still impacting spend across enterprises
- Global Messaging segment delivered organic growth of 33% in fixed FX
Reported volume growth for Q4 23 at 11%
- Higher priced OTT channels continued to gain traction in selected markets
- Improving ROI for clients compared to traditional SMS messaging
- Lower volume for email more than offset by strong growth for new OTT channels
Interim Report Q4 2023
link mobility
All-time high reported gross profit – YoY growth of 24%
FX tailwind contributed 11 percentage points to gross profit growth
Gross profit NOKm
Europe enterprise gross margin (%)
Organic gross profit growth 13% in fixed FX
- European enterprise segments delivered 11% organic growth
- Growth supported by closed contracts last quarters
- Western Europe in the high end of growth expectations in retail
- Expanded use of higher margin channels like RCS
- Global Messaging organic growth of 37% in fixed FX
- Returned to high single digit normalized margin in the quarter
Enterprise gross margin improved YoY to 26%
- Larger portion of messages on high margin OTT channels like RCS
Interim Report Q4 2023
link mobility
All-time high reported adjusted EBITDA – YoY growth of 37%
FX tailwind contributed 13 percentage points to adjusted EBITDA growth
Adjusted EBITDA NOKm
Adjusted EBITDA margin (%)
Organic growth in adjusted EBITDA 24% in fixed currency
- Adjusted EBITDA growth of NOK 31 million YoY
- NOK 19 million from ordinary course of business
- NOK 12 million from cost reduction program initiated late 2022
Total adjusted EBITDA margin expanded 0.8 percentage points
- Enterprise margin expanded 0.9pp YoY to 15.8%
- Improved gross margin YoY
- Execution on cost initiatives contributed to margin expansion
- High activity for Global Messaging had a small dilutive effect
Interim Report Q4 2023
link mobility
P&L
| NOK in millions | Q4 2023 | Q4 2022 | YTD 2023 | YTD 2022 |
|---|---|---|---|---|
| Total operating revenues | 1 796 | 1 423 | 6 282 | 4 914 |
| Direct cost of services rendered | (1 411) | (1 113) | (4 934) | (3 775) |
| Gross profit | 385 | 309 | 1348 | 1138 |
| Operating expenses | (204) | (177) | (735) | (653) |
| Adjusted EBITDA | 181 | 133 | 613 | 486 |
| Non-recurring costs | (46) | (62) | (135) | (147) |
| EBITDA | 135 | 71 | 478 | 339 |
| Depreciation and amortization | (122) | (106) | (458) | (406) |
| Impairment cost | - | (180) | - | (180) |
| Operating profit (loss) | 13 | (216) | 20 | (248) |
| Net financials | 25 | (161) | (82) | (26) |
| Profit (loss) before income tax | 38 | (377) | (61) | (274) |
| Income tax | (9) | 53 | 13 | 4 |
| Profit (loss) from continuing operations | 29 | (324) | (49) | (270) |
| Profit (loss) from discontinued operations | 9 | 45 | 116 | 119 |
| Profit (loss) for the period | 37 | (279) | 67 | (151) |
Non-recurring costs of NOK 46 million
- M&A costs of NOK 3 million
- Costs related to restructuring NOK 18 million
- Organizational changes – partly replacing future option cost
- Share-option costs of NOK 26 million
- Quarterly LTIP options cost of NOK 14 million
- Social security cost accrual increase of NOK 12 million
Depreciation and amortization NOK 122 million
- Depreciation of intangible assets from R&D NOK 29 million
- Depreciation of PPA's NOK 87 million
- Depreciation of leasing and fixed assets NOK 6 million
Net financials positive NOK 25 million
- Currency effect gain of NOK 51 million with limited cash effect
- Net interest costs of NOK 28 million mainly related to bond loan
- Other financial items of NOK 13 million related to
- Positive adjustment of earn-out of NOK 6 million
Discontinued business – Message Broadcast
- Includes transaction related costs of NOK 19 million
Interim Report Q4 2023
link mobility
Strong cash on balance sheet
| NOK in millions | Q4 2023 | Q4 2022 |
|---|---|---|
| Non-current assets | 6 537 | 8 924 |
| Trade and other receivables | 1 380 | 1 244 |
| Cash and cash equivalents | 1 097 | 827 |
| Current assets held as available for sale | 2 667 | - |
| Total assets | 11 681 | 10 994 |
| Equity | 5 514 | 5 226 |
| Deferred tax liabilities | 274 | 533 |
| Long-term borrowings | 4 008 | 3 837 |
| Other long term liabilities | 38 | 45 |
| Long-term liabilities held as available for sale | 193 | - |
| Total non-current liabilities | 4 514 | 4 416 |
| Trade and other payables | 1 494 | 1 331 |
| Other short term liabilities | 55 | 22 |
| Short-term liabilities held as available for sale | 104 | - |
| Total current liabilities | 1 653 | 1 353 |
| Total Liabilities | 6 167 | 5 769 |
| Total liabilities and equity | 11 681 | 10 994 |
Non-current assets increased mainly due to currency effects
- Total goodwill of NOK 6.1 billion – whereof NOK 1.9 billion related to US
Cash on balance sheet up YoY to NOK 1.1 billion
- Expanding from solid organic growth and seasonal WC release
- NOK 118 million cash outflow related to buy back of own bonds in Q4
Equity NOK 5 514 million and equity percentage of 47%
Receivables and payables increased with organic growth and FX effects
Net interest-bearing debt* of NOK 3 056 million
- Acquisition of 10 EUR million own bonds below par completed in December
- Leverage post closed MB transaction around at 1.1x
Interim Report Q4 2023
- Calculated according to the company's bond terms
link mobility
Cash flow after CAPEX and interest more than doubled
Yield on cash reserves to offset interest payable on bond loan
| Proforma Europe* LTM NOK million | Q4 2022 | Q1 2023 | Q2 2023 | Q3 2023 | Q4 2023 |
|---|---|---|---|---|---|
| Adj.EBITDA | 486 | 490 | 534 | 565 | 613 |
| Change working capital | -35 | -16 | -32 | -48 | -7 |
| Taxes paid | -58 | -45 | -54 | -63 | -42 |
| Non-reccurring costs M&A | -99 | -92 | -82 | -69 | -38 |
| Net cash flow from operating activities | 293 | 336 | 366 | 384 | 527 |
| Add back non-recurring costs M&A | 99 | 92 | 82 | 69 | 38 |
| Adj. cash flow from operations | 392 | 428 | 448 | 453 | 564 |
| Capex | -132 | -114 | -110 | -112 | -111 |
| Lease and bond | -89 | -89 | -93 | -93 | -97 |
| Cash flow after capex and interest | 171 | 225 | 245 | 248 | 357 |
High cash conversion from adjusted EBITDA
- LTM improved FCF supported by organic growth momentum
- Cost initiatives supported improved cash generation
CAPEX expected to be in line with historical trends
- Maintain and develop relevant CPaaS product portfolio
Bond interest to be offset by interest income on cash
- Interest yield on cash balances > interest coupon on bond
- Accretive M&A will impact net interest payable
Cash position post US divestment of NOK 3.4 billion
- Capacity for accretive M&A
- Prudent excess cash allocation
- Further bond buy-back if satisfactory yield
- Share buy-back linked to current option incentive plans
New conservative net debt policy at 2 - 2.5x adjusted EBITDA
- Well below current incurrence test at 3.5x adjusted EBITDA.
Interim Report Q4 2023
- Proforma FCF for European business – Interest paid excluding bond-tap in June 2021 related to acquisition of Message Broadcast link mobility
Appendix
Q4 2023
15 February 2024
link mobility
Northern Europe
Interim Report Q4 2023
currency link mobility
Central Europe
Interim Report Q4 2023
link mobility
Western Europe
Interim Report Q4 2023
link mobility
Global Messaging
Interim Report Q4 2023
Link mobility
15 February 2024
link mobility
Q&A
linkmobility.com/investors