Financial presentation
Q1 2023
10 May 2023
LINK in short
#1 in Europe for enterprise digital messaging - Established player for more than 20 years
- ~ 700 employees in 30 offices across 18 countries
- 17 billion messages sent annually by 51,000 customers
Adjusted EBITDA NOKm
Q1 2023 highlights
Stronger than expected first quarter
Revenue reported at NOK 1 440 million. Organic growth in fixed currency 12%
- US reporting a 119% revenue growth with traction on messaging services and diversification of critical events messaging
- Europe reported modest revenue growth as expected at 4% held back by high comparables due to significant covid traffic same period last year
Gross profit reported at NOK 398 million. Organic growth in fixed currency 13%
• Increased margins for enterprise clients due to mix effects with a higher portion of revenue deriving from high margins clients and products
Adjusted EBITDA reported at NOK 181 million. Organic growth in fixed currency 16%
• Opex reductions delivered as plan with a contribution of NOK 17 million in the quarter
High cash generation after capex and interest of NOK 118 million
• Group leverage reduced to 4.3x from 4.6x previous quarter
LINK signed all-time high 826 new and expanding agreements in the first quarter
• Forecasted gross profit contribution from new contracts in the last two recent quarters significantly higher than historical averages
Reported figures impacted by NOK depreciation
| NOKm |
Q1 2022 |
Organic growth |
FX effect |
Q1 2023 |
| Revenue |
1 174 |
138 |
128 |
1 440 |
| Organic growth (%) |
|
12% |
|
|
| Gross profit |
322 |
41 |
35 |
398 |
| Organic growth (%) |
|
13% |
|
|
| Adjusted EBITDA |
142 |
23 |
16 |
181 |
| Organic growth (%) |
|
16% |
|
|
Gross profit growth better than expected
Europe as expected whilst US exceeds expectations
US reporting high gross profit growth
- Strong momentum for messaging solutions
- Catch-up effect from build-up of contract backlog last year
- Two new clients signed end of last year started to contribute to the P&L
- Critical events messaging amounting to USD 1.4 million in Q1 23
- Related to winter storms from broader geographical exposure enabled by new clients
Moderate underlying growth in Europe as expected
- High comparables as Q1 2022 experienced large volumes due to covid testing
- Softer European retail volumes in January and February following a stronger Q4 22
- High order backlog into 2023 expected to improve growth momentum gradually through the year
Organic gross profit development in NOKm
Quarterly US revenue USDm
Cost reduction initiatives delivered according to plan
Reported costs higher with NOK depreciation
Opex development YoY NOKm
Opex growth of 10% in stable currency
- Investments in commercial capabilities in the US through 2022 and onboarding of customer base with full effect in the quarter
- Limited growth in opex in European footprint at 5%
- Cost reductions at Group level drives decline YoY in group costs
Cost initiatives delivering according to communicated plans
- Total cash savings from cost initiatives expected at NOK 105 million level as previously communicated.
- Depreciation of NOK impacts nominal effect of cost reductions
Cost saving initiatives in fixed FX NOKm
Strong growth in European contract backlog
SMS remains the channel of choice with more than 5 billion global users
Clear step up in new contract wins following commercial refocus last year
- High contract backlog into 2023 to materialize in P&L throughout the year
- Historically 75% of gross profit recorded in P&L within 12 months
New contract wins increased 45% YoY in Q1 23
• Forecasted gross profit contribution from new wins NOK 40 million
Preferred customer channel SMS saw strong growth of 55%
• Traditional products chosen in uncertain macroeconomic landscape
CPaaS contributed NOK 7 million in expected new contract gross profit
Gross profit contribution from new contract wins
LINK grows and retains customers
Base expanding quarter by quarter
51' active customer accounts, growing 8% YoY Organic growth 3,611 new customer accounts
Record new agreements signed Contract wins grew 10% YoY to 826
Customer churn remained low at 1.5% in Q1 23
Customer accounts
Q1 on-track to deliver 2023 forward-looking statement
Forward-looking statement 2023 reiterated
Gross profit growth expected to be higher than in 2022
Organic adjusted EBITDA growth expected to be 12-15% in fixed currency
• Supported by execution on opex savings
Financial review
Q1 2023
Reported revenue growth of 23%
FX tailwind contributed 11 percentage points
Reported revenue NOKm
Reported volume (mill transactions)
Organic revenue growth of 12% in fixed currency
- Higher than expected revenue contribution from the US
- Critical events related revenue of NOK 14 million from winter storms
- Messaging solutions growth driven by signed contracts in H2 22
- European footprint in line with expectations with strong comparable Q1 22
- Enterprise retail segments somewhat softer than in Q4 but good traction on new contract signings both for local and global clients
- Continued high growth momentum in Global Messaging
Reported volume growth for Q1 23 at 8% and lower than revenue growth
- Higher share of non-messaging revenue like licences and professional services
- Destination mix effects in Global Messaging towards higher priced countries
Gross profit growth of 24%
FX tailwind contributed 11 percentage points to gross profit growth
Gross profit NOKm
Gross margin (%)
Organic gross profit growth 13% in fixed currency
- Large contribution to growth from high margin US business
- Gross profit growth in European negatively impacted by comparables
- Q1 22 included high margin covid traffic especially in Austria
Gross margin slightly improved with mix effects
- Enterprise segment contributed positively by 1.1 percentage points
- Large share of high margins clients and products
- Central Europe margin dilution YoY with discontinuation of covid traffic
- Global Messaging higher share of revenue with dilution effect
Adjusted EBITDA growth of 27%
FX tailwind contributed 11 percentage points to reported adjusted EBITDA growth
Opex NOKm
Adjusted EBITDA NOKm
Organic growth in opex of 10% in fixed currency
- US main contributor to opex growth
- Investments through 2022 and adding on customer base late Q4 22
- European opex growth managed at 5% in fixed currency
- Cost initiatives executed according to plan
Organic growth in adjusted EBITDA 16% in fixed currency
- Higher than expected gross profit contribution from the US
- Managed opex growth with cost initiatives
P&L - Non-recurring costs shifted to lower level
| NOK in millions |
Q1 2023 |
|
Q1 2022 Full Year 2022 |
|
|
|
|
| Total operating revenues |
1440 |
1 1 7 4 |
5 1 9 0 |
| Direct cost of services rendered |
(1041) |
(852) |
(3805) |
| Gross profit |
398 |
322 |
1385 |
|
|
|
|
| Operating expenses |
(218) |
(179) |
(760) |
| Adjusted EBITDA |
181 |
142 |
625 |
|
|
|
|
| Non-recurring costs |
(14) |
(28) |
(148) |
| EBITDA |
167 |
115 |
478 |
|
|
|
|
| Depreciation and amortization |
(108) |
(100) |
(416) |
| Impairment of intangible assets and goodwill |
|
|
(180) |
| Operating profit (loss) |
58 |
15 |
(118) |
|
|
|
|
| Net financials |
(71) |
(6) |
(37) |
|
|
|
|
| Profit (loss) before income tax |
(12) |
9 |
(155) |
|
|
|
|
| Income tax |
16 |
(8) |
4 |
| Profit (loss) for the period |
3 |
1 |
(151) |
Non-recurring costs of NOK 14 million
- Share-option cost of NOK 7 million
- Restructuring costs of NOK 4 million
- Costs related to M&A of NOK 3 million
Depreciation and amortization NOK 108 million
- Depreciation of intangible assets NOK 20 million from internal R&D
- Depreciation of PPA's NOK 83 million
- Depreciation of leasing arrangements and fixed assets NOK 5 million
Net financial items negative NOK 71 million
- Negative currency effect of NOK 32 million with limited cash impact
- Interest NOK 39 million reflecting outstanding EUR 370 million bond
Solid balance sheet
| NOK in millions |
Q1 2023 |
Q1 2022 |
Year 2022 |
|
|
|
|
| Non-current assets |
9 3 8 3 |
8589 |
8924 |
| Trade and other receivables |
1 2 7 8 |
865 |
1 244 |
| Cash and cash equivalents |
964 |
802 |
827 |
| Total assets |
11 625 |
10 256 |
10 994 |
|
|
|
|
| Equity |
5 5 0 8 |
5 0 2 1 |
5 2 2 6 |
| Deferred tax liabilities |
517 |
543 |
533 |
| Long-term borrowings |
4 1 6 3 |
3597 |
3837 |
| Other long term liabilities |
38 |
62 |
45 |
| Total non-current liabilities |
4718 |
4 203 |
4 4 1 6 |
| Trade and other payables |
1 3 2 4 |
936 |
1 3 3 1 |
| Other short term liabilities |
75 |
96 |
22 |
| Total current liabilities |
1 3 9 9 |
1 0 3 2 |
1 3 5 3 |
| Total Liabilities |
6 117 |
5 2 3 5 |
5769 |
|
|
|
|
| Total liabilities and equity |
11 625 |
10 256 |
10 994 |
Non-current assets increased mainly due to currency effects
• Marginal additions related to PPA
Cash on balance sheet NOK 964 million
• Expanding QoQ from free cash flow generation and positive FX impact
Equity NOK 5,508 million and equity percentage of 47%
Receivables and payables increased with organic growth and currency effects
Net interest-bearing debt* of NOK 2.917 million
LINK leverage trending down
Strong growth in adjusted EBITDA and high cash conversion drives leverage down to 4.3x
| NOK '000 |
Q2 2022 |
Q3 2022 |
Q4 2022 |
Q1 2023 |
LTM |
| Adjusted EBITDA |
129 |
166 |
188 |
181 |
|
| Change working capital |
89 |
(103) |
66 |
(27) |
|
| Taxes paid |
(6) |
(10) |
(30) |
0 |
|
| Non-reccuring costs M&A |
(18) |
(15) |
(53) |
(7) |
|
| Net cash flow from operating activities |
194 |
38 |
170 |
147 |
|
| Add back non-recurring costs M&A |
18 |
15 |
53 |
7 |
|
| Adjusted cash flow from operations |
212 |
53 |
223 |
154 |
|
| Capex |
(45) |
(38) |
(47) |
(35) |
|
| Interest |
(69) |
(1) |
(69) |
(1) |
|
| Cash flow after capex and interest |
98 |
14 |
107 |
118 |
|
Leverage (Net debt / LTM proforma adjusted EBITDA)*
| 15 |
Interim Report Q1 2023 |
|
|
|
|
Adjusted LTM cash flow from operations NOK 549 million Reported cash flow from operations include M&A related expenses FCF generated after capex and interest of NOK 337 million
Working capital varies significantly between quarters
LTM build mainly reflects periodization and not higher underlying WC WC remains net negative and a funding source for organic growth
High cash conversion LTM
Adjusted cash flow from operations 97% to adjusted EBITDA Free cash flow after interest and capex 51% to adjusted EBITDA
Cost reduction initiatives support FCF and adjusted EBITDA in 2023
LTM Q1 23 leverage reduced to 4.3x during first quarter FCF and growth in adjusted EBITDA to continue deleveraging trend
LINK's EUR 370 million fixed coupon bond matures in December 2025 Fixed interest rate at 3.375% secured for 2.5 years
*Calculated according to the company's bond terms
Appendix
Q1 2023
Northern Europe
Central Europe
Western Europe
North America
Global Messaging
Q&A
linkmobility.com/investors
10 May 2023