Earnings call transcript: Link Mobility’s Q4 2024 shows steady growth

Link Mobility reported its Q4 2024 earnings, showcasing strong financial performance and strategic advancements. While the company did not provide specific earnings per share (EPS) or revenue data for the quarter, it highlighted significant growth in annual revenue and profitability. Currently trading at $6.83, the stock has experienced significant volatility, with a -16.4% decline over the past week despite a strong 52.46% gain over the last six months.

According to InvestingPro, the company’s financial health score is rated as "FAIR," with particularly strong momentum metrics. InvestingPro subscribers have access to 12 additional exclusive tips about Link Mobility’s current market position and future prospects.

Key Takeaways

• Link Mobility reported a 19% compound annual growth rate (CAGR) in revenue over recent years.
• The company achieved a 13% growth in gross profit, amounting to $436 million.
• Strategic focus on AI and RCS technology is driving innovation.
• The company plans to pursue M&A opportunities to bolster growth.
• The stock rose 2.49% in aftermarket trading.

Company Performance

Link Mobility demonstrated robust performance, with annual revenue reaching NOK 7 billion and a 19% CAGR. The company’s gross profit grew by 13%, and adjusted EBITDA increased by 17%, reflecting improved operational efficiency. InvestingPro data shows a healthy gross profit margin of 41.82% and a strong current ratio of 6.16, indicating solid operational efficiency and liquidity. The company continues to lead the European CPaaS market with a strong presence in the Nordic region and expansion into Central Europe.

Financial Highlights

• Annual Revenue: NOK 7 billion
• Gross Profit: $436 million (13% growth)
• Adjusted EBITDA: $718 million (17% growth)
• EBITDA Margin Improvement: 1.5 percentage points

Market Reaction

Link Mobility’s stock experienced a 2.49% increase in aftermarket trading, with the price reaching $7. This movement came after a 5.4% decline during regular trading hours. The stock’s performance reflects investor confidence in the company’s strategic direction and growth prospects, despite broader market volatility.

Outlook & Guidance

Looking forward, Link Mobility expects high single-digit gross profit growth, with EBITDA growth anticipated to outpace gross profit growth. The company has identified 11 potential M&A targets and aims for a 10% EBITDA growth through bolt-on acquisitions. The leverage target is set between 2.0x and 2.5x EBITDA.

Executive Commentary

CEO Thomas Bargue emphasized Link Mobility’s leadership in the CPaaS sector, stating, "Link is the leading and largest CPaaS player in Europe." He also highlighted the strategic importance of RCS technology, describing it as "SMS version two." Bargue noted the company’s strong cash position, indicating potential for strategic investments: "We have too much cash on the balance sheet right now."

Risks and Challenges

• Market saturation in the Nordic region could limit growth opportunities.
• Operator price increases may impact profitability.
• Competition from global players in the CPaaS market could affect market share.
• Economic uncertainties in Europe may influence enterprise spending on communication solutions.
• Integration challenges from potential M&A activities could disrupt operations.

Q&A

During the earnings call, analysts inquired about the integration of AI into product offerings, the expansion of RCS channels, and the potential for European and global M&A. The management addressed concerns about managing CPaaS contract growth risks and mitigating operator price increases, emphasizing their strategic initiatives to drive sustainable growth.

Full transcript - Interlink Electronics Inc (LINK) Q4 2024:

Martin Evarchin, CFO and Head of Investor Relations, Link Mobility: Good morning and welcome to the fourth quarter twenty twenty four financial results presentation for Link Mobility. My name is Martin Evarchin, CFO and Head of Investor Relations. And this morning, I am joined by Thomas Bargue, CEO, and together we will present the results. After the presentation, there will be a Q and A session. Please post questions online during and after the presentation.

Thomas, the word is yours.

Thomas Bargue, CEO, Link Mobility: Thank you, Martin. The fourth quarter of twenty twenty four is another great quarter, concluding a strong year with 10% gross profit growth and 13% adjusted EBITDA growth. Link is the leading and largest CPaaS player in Europe. We started out more than twenty years ago in The Nordics and have been part of building the messaging market in The Nordics to one of the most advanced messaging markets in the world. Linq is using this experience to fuel their development in the less penetrated markets in Europe.

Our strategy is dedicated to providing digital communication products to the enterprise market for them to interact with our end customers. We approach the enterprise market through a strategy of local touchpoints with our clients. We have numerous sales reps, customer service, and customer success employees on the ground, winning new contracts and supporting existing clients in local language and culture. This setup is creating a larger reach than many of our competitors who have a more regional or centralized approach to the market. Links more than 50,000 clients serviced by our 30 offices in 18 countries are a result of the successful implementation of this strategy over many years.

Group revenue during the last twelve months was recorded at 7,000,000,000. Link has grown significantly over the last years with a revenue CAGR of 19%. Profitability has always been a key priority. Link is growing the business while generating consistent profitability growth with a CAGR of 16% the last four years. For 2024, adjusted EBITDA is reported at $718,000,000 or a growth of $105,000,000 or 17%.

Bink has a central position in the industry value chain supporting clients with connectivity and SaaS solution to enable clients to communicate with their end users. Enterprises have a constant need to communicate and inform their end users. The enterprises are increasingly choosing the mobile phone as the communication channel towards their end users. This megatrend is being driven by the end users. We prefer that enterprises communicate with us over the mobile phone and the enterprises are just adapting.

Linq has the connectivity to the mobile operators and the relevant OTT channels, which is combined with our software solutions to provide our enterprise clients with an end to end communication solution towards their end users. Those software solutions include chatbots combined with AI, marketing automation, CDP, payment solution, and template builders and managers just to mention some. Linq software solutions combined with the connectivity enables a state of the art multi channel and conversational communication platform ensuring satisfied end users and high return on investments for our clients. Linq is operating in a growing market. There are two main growth engines in our industry.

Firstly, more and more enterprises are using digital communication solutions, and they are utilizing it in more and more areas. This significant upside is documented by differences in penetration rates per country. The Nordics are the most penetrated regions, with the rest of Europe lagging two fifty messages per citizen per year behind The Nordics. This is a 134% gap or a growth potential as we see it. Successfully introducing new use cases to market will result in a higher growth momentum as the penetration rates are increasing.

Link has an excellent position to extract this growth with our local approach. We have people on the ground to explain and motivate enterprises to adopt new ways of communicating digitally, learning from our experience in the more advanced Nordic region. Secondly, new channels like RCS and WhatsApp are opening up for new ways of engaging with end users through initiating conversations with the support of AI driven bots. We already see these more advanced products yielding significantly higher value for our customers enabling us to charge a premium for those services. Before presenting the Q4 results I would like to summarize the strong year of 2024.

Linq performed in the high end of expectations with a 10% gross profit growth and 13% adjusted EBITDA. These growth numbers are well over what peers have been able to deliver, which in our view is the documentation of the strength of Linq’s local approach. Our local teams are working the market, growing the number of use cases in each country, and we are increasing our market share. The fourth quarter reports high performance with an organic gross profit growth of 8% on top of high comparable same period last year. Adjusted EBITDA growth is reported organically at 12%.

The quarter is a continuation

Martin Evarchin, CFO and Head of Investor Relations, Link Mobility: of

Thomas Bargue, CEO, Link Mobility: the solid performance the company has reported over the last seven to eight quarters. In the current quarter, gross profit growth is significantly higher than revenue growth. Gross profit growth is driven by more activity on higher value clients and advanced products with higher margins. Revenue growth in the current quarter is impacted by software development on low margin traffic partly caused by high comparables in the Global Messaging segment but also on certain high volume low margin enterprise clients. The profitability contribution of the more on the more advanced products have contracted the softer development on the low margin traffic on the gross profit but not to the same extent on revenue thereby resulting in a higher gross profit growth than revenue growth.

The enterprise segment is reporting a revenue growth of 50,000,000. Revenue in global messaging has declined 78,000,000 due to link terminating traffic to lower margin destination focusing on more profitable arrangements. The aggregator business in global messaging is more volatile and less sticky compared to the enterprise regions. Volumes fluctuate based on decisions on the Link side as well as clients’ needs and adaptions. Link has terminated several low margin destinations, reduced revenue growth but still increasing gross profit growth and gross margin in the segment.

Gross profit is reported at $436,000,000 or an organic growth of 8% in fixed currency, which is in line with the expectations of high single digit gross profit growth. Adjusted EBITDA is reported at $213,000,000 or an organic growth of 12% in fixed currency, higher than gross profit growth due to Link’s scalable business model. Link also generated high net operating cash flows of $166,000,000 Link has invested significant resources over the last years to have a superior product offering on RCS, combining the channel with AI driven chatbots and template managers and builders to automate and support client communications and campaigns. Juniper has recently rewarded Link with the Platinum Award for the best RCS solution in Europe. Gross profit is reported at SEK $436,000,000 or a growth of 8% in fixed currency, a solid contribution from the more advanced CPaaS solutions with higher margins together with strong growth momentum on high margin clients and traffic was the main driver of the growth.

Q4 is a retail heavy quarter and we observe strong interest for many clients to perform more advanced mobile marketing campaigns on richer channels like RCS in combination with chatbots. This effect is also evident in the organic margins with a 2.1 percentage points increasing gross profit margins. The graph at the bottom of the slide displays the margin impact from the segments. Both the enterprise segment and global messaging is reporting an increase in margins with approximately one percentage points each. Link’s revenue churn has historically been low, normally between 1% to 2% of revenue.

Last quarter, the churn was extraordinarily impacted by terminated clients in global messaging with minimal effect of gross profit growth. In the current quarter, the churn on global messaging has returned to a normalized level, and the revenue decline on this segment is a result of terminating traffic to low margin destinations on existing clients. Enterprise churn is reported at 2.2%. Similar trend or similar trends as observed in the third quarter. The enterprise churn was impacted by a bankrupt retail client in Western Europe increasing the churn with plus 0.2 percentage points.

Net retention in the current quarter is a less relevant KPI due to a stronger growth momentum on higher value clients and products and softer growth on low margin revenue resulting in solid gross profit growth while the revenue development is more stable. The softer growth on low margin revenue is partly explained by high comparables same period last year and the refocus on profitability in global messaging terminating high volume but very low margin traffic. Net retention is expected to normalize after Q2 twenty twenty five. With normalizing, the company is expecting a net retention rate more in line with gross profit growth, excluding the impact from new clients. Link has significant improvement in new business wins over the last two years based on the renewed focus and changes in commercial execution.

The graph on the bottom left shows the estimated analyzed gross profit on new contracts. The numbers are extracted from our CRM systems and the estimations are based on contractual arrangements and specific dialogue with clients. Internally in LINQ we have a target of achieving 40,000,000 plus in gross profit from new contracts per quarter except Q3 which will be lower due to some vacation. The current quarter resulted in 38,000,000 in expected gross profit from new contracts, isolating new contracts for the advanced conversational products named CPaaS in the graph. The current quarter is at $14,000,000 on estimated gross profits.

We observe more traction and market demand on advanced mobile marketing solutions combined with bots and WhatsApp RCS. We also see more demand for marketing automations and CDP in The Nordics. The OTT channels are in high demand. RCS and WhatsApp combined with chatbots and other software solutions are growing rapidly. The main use cases are mobile marketing and customer support use cases.

Link is further enhancing its SaaS solutions with AI content creation to help our clients to automate more of their campaign activity. Historically, about 75% of the gross profit is recorded in the P and L after twelve months. We expect the higher contract backlog to benefit gross profit growth gradually. The more advanced CPaaS contracts take longer to scale volumes versus legacy products, but of course results in immediate and higher license revenue. Link has a healthy sales pipeline in addition to new agreements well.

RCS is a feature rich channel that we expect significant growth from going forward. RCS can be viewed as SMS version two as the channel is embedded in the SMS app but with all the functionality and features were used on, for example, WhatsApp or iMessage. RCS has been on the market for several years but until now only been available or compatible on selected Android handsets. Apple (NASDAQ:AAPL) has not opened up for RCS until now. This has held back the adoption significantly.

Apple launched RCS on iOS 18.1 and are gradually rolling out this feature through mobile operators in Europe. Spain, France, UK, Belgium, and Germany offer RCS on both IOS and Android. The rest of the countries are waiting for IOS to be rolled out. Customer demand is driven by the additional value this channel is creating through a better end user experience and interaction. We see higher response rates, engagement, and significantly better conversion on RCS than SMS.

We expect material commercial traction on RCS when you can reach all end users with the increased security, features, and ease of engaging into conversational dialogue. RCS is rapidly growing as we speak, but we expect this growth to accelerate when the channel is available for most end users. Linq has made significant investments in RCS as a channel and developed software solutions on top of the channel. The state of the art product offering has been recognized by Juno Press the best RCS business messaging solution in Europe. Specifically, Linx AI bots and software solutions supporting and automating client campaigns on RCS together with our exceptional customer support has been highlighted by Juniper as unique in the industry.

RCS is getting traction in The Nordics also. Two large Nordic brands have started utilizing RCS for customer dialogue with tremendous results. RCS through the channels rich feature set is enabling increased customer value through higher sales conversion, click through rates and end user engagement. Linq’s state of the art RCS product offering will secure the company a leading position in this rapidly growing market. In addition to organic growth opportunities, the company is well positioned for inorganic growth through M and A.

Link has the competency, the historical track record for value creation through M and A and a solid pipeline with M and A targets. Since 2015, Link has closed over 30 acquisitions of which the majority have been a great success, generating significant value. In 2024, Linq has closed three acquisitions, Easy4U in Portugal, NRS in Spain, and Reach Interactive in UK, and more is expected to come. All of these three acquisitions had a multiple of between six to seven times cash EBITDA and was highly accretive to Linx’s own valuation. We have 11 prioritized targets.

Most of them are located in Europe. These prioritized targets have an EBITDA target of up to 30 to €40,000,000. Of these 11 targets, Link has four companies under due diligence as we speak. In q four, one target in due diligence process was dropped due to our findings and has been replaced by another opportunity. Bolt ons in Europe have priority, but we’re also looking outside Europe.

Private companies in our space have a target evaluation of between six to eight times cash EBITDA before synergies. The quality of the customer base, growth momentum of the targets, and synergy potential are the main criteria, placing the valuation in the mentioned range of six to eight times cash EBITDA. The company is pointing to Link’s stable historical performance to provide further guidance on reasonable expectations going forward. We expect Link’s European business to continue to display a high single digit gross profit growth rate. Additionally, we expect the adjusted EBITDA growth rate to be higher than the gross profit due to our scalable business model.

Inorganically, Link has a growth target of 10 on adjusted EBITDA through bolt on acquisitions. Link has NOK 2,500,000,000.0 in cash reserves. The cash position will be further strengthened by time as the company historically generates approximately NOK 400,000,000 in free cash flow on a yearly basis. The high cash reserves will be used for acquisitions and a significant repayment of the existing bond when the last charge of the bond will be refinanced in 2025. Acquisitions will not increase net debt beyond a leverage ratio of between two point zero to 2.5.

That was my part of the presentation. Morten, please take over to guide us through the financial section.

Martin Evarchin, CFO and Head of Investor Relations, Link Mobility: Thank you, Thomas. Link reports quarterly revenue of more than NOK1.8 billion. Revenue growth was, as in the third quarter, impacted by termination of low value traffic in the global messaging segment. While in Q3 twenty three, we observed high comparables on high volume, low margin clients, leading to a slight organic revenue decline in stable currency of 2%, taking into account positive currency effects of $22,000,000 in the quarter. Acquisitions closed this year contributed with 58,000,000 and total reported revenue growth was 3% in the quarter.

Zooming in on the organic revenue development, enterprise revenue growth was 4% with Central Europe contributing significantly to the total growth of 50,000,000 with healthy growth on both domestic and global clients. And organic revenue growth in the region was 13. Northern Europe delivered low digit growth in line with previous quarters and was negatively impacted by three percentage points from the internal shift of global clients to Central Europe. Western Europe remained fairly stable due to higher comparables, mainly on high volume and low margin clients. The global messaging segment reported revenues of nearly $380,000,000 or an organic decline of 17% impacted by termination of low value traffic as in line with the previous quarter from refocus towards higher value traffic mix and reduced credit risk.

Total (EPA:TTEF) volume reported for the quarter was close to $6,000,000,000 Messages representing a reported growth of 24% and impacted by adding on significant volumes from the LATAM business part of the acquisition of NetWeal Solutions in Spain. Organic volume growth on SMS was, as for revenue, impacted by termination of traffic and higher comparable low margin traffic. While other messaging, including OTT channels, continued to grow with solid growth momentum organically at 30%. Moving over to the next slide on gross profit. Gross profit is reported at $436,000,000 or a reported growth of 13% with a positive impact from currency of 5,000,000 and acquisitions adding on 16,000,000.

Organic growth in stable currency was 8% and outpacing revenue growth from shift towards higher value revenue compared to the same quarter last year. We are pleased to deliver a strong last quarter of twenty twenty four with gross profit growth in line with expectations and concluding the year with double digit organic gross profit growth. The enterprise gross profit growth improved quarter over quarter by two percentage points to 8% and outpacing revenue growth of 4% from improved revenue mix towards both higher value traffic and products. In terms of regional contribution, Northern Europe delivered an underlying gross profit growth of 3% adjusted for the internal shift of global clients to Central Europe. The underlying growth momentum is soft on existing clients influenced by price increases from operators of the last few years, while new contracts contribute positively.

Central Europe contributed positively to total growth from both top line growth but also an improved contribution from more advanced products on selected global clients, leading to a reported organic growth of 23% in the quarter, including approximately two percentage point growth from the internal shift of clients from The Nordics. Western Europe delivered organic growth in line with the previous quarter of 2% impacted by both the isolated bankruptcy churn of a large retail client since last quarter and high comparable same quarter last year. In the quarter, the disputed operator price increase in Italy was resolved, resulting in a full reversal of the accrued COGS last quarter of $3,000,000 Higher interest in an increased use of richer OTT channels contributed positively in a retail peak quarter, but was partly offset by the isolated retail churn, which included a high OTT share. The lower graph shows development in the gross margin level in the enterprise segment, which improved year over year and quarter over quarter to 27%. The mix towards higher margin revenue as in traffic and products impacted enterprise margin positively, while the reversal of accruals related to the disputed operator price increase had a 0.2 percentage points impact on the margin year over year.

Then to the next slide on adjusted EBITDA. Adjusted EBITDA is reported at $213,000,000 A reported growth of 1812% or $22,000,000 organic growth in stable currency. Growth is driven by 30,000,000 organic gross profit growth and partly offset by an organic OpEx growth of 4% or 8,000,000 in the quarter. The increase in operating expenses was mainly driven by salary inflation and growth related items. The inorganic growth contribution from acquisitions closed in 2024 was 9,000,000 in the quarter.

Adjusted EBITDA margin improved year over year by 1.5 percentage points, driven by the expansion in gross margin, partly offset by increased OpEx to sales ratio linked to revenue decline from low margin traffic. In the lower graph, we have bridged the effects from non recurring costs between adjusted EBITDA and EBITDA in the fourth quarter. In total, we recognized non recurring costs of $51,000,000 in the quarter. Cost related to share option was reported at $8,000,000 and includes outstanding incentive programs and employee share option programs with a declining cost recognition as programmes approach maturity. M and A costs were NOK 21,000,000 in the quarter and were 15,000,000 was related to closed acquisitions, while the residual is related to ongoing processes, including the ongoing due diligence processes on four prioritized targets.

Other nonrecurring costs was related to restructuring. Cost related to severance agreements of 5,000,000. Unfortunately, we experienced a successful pitching attempt in one of our subsidiaries despite high focus on awareness and training on this topic. The amount assumed lost in relation to the incident is 18,000,000. And an insurance claim is ongoing and still pending conclusion.

Moving over to the P and L. I will only focus on a selected few items as we have been through development in adjusted EBITDA, and I have explained the nonrecurring cost in the quarter. The cost of depreciation and amortization is reported at 82,000,000, a 9,000,000 decrease related to a one time catch up in D and A in the fourth quarter of twenty twenty three. D and A related to acquisitions added was 3,000,000, which together with currency effect was fully offset by decline in D and A on development projects and right of use assets. Net financial items are reported at negative 27,000,000 and includes a net currency gain of 14,000,000, recognized in relation with revaluation of the earn out from message broadcast divestment of 50,000,000, partly offset by a small net other currency loss of 1,000,000.

Net interest cost reported at 25,000,000 includes 27,000,000 in bond interest costs, 10,000,000 in amortized transaction costs, where of 6,000,000 is an early recognition due to the partial refinancing of Link zero one bond ahead of maturity. Interest and transaction cost was partly offset by net interest from cash deposits totaling €12,000,000 in the quarter. Then to the balance sheet. Non current assets amount to 6,600,000,000.0 worth 4,700,000,000.0 in goodwill. The year on year increase of $260,000,000 is mainly driven by acquisitions closed in 2024 contributing 200,000,000, while the remaining increase is related to currency effects.

The decline in non current assets from the third quarter of $860,000,000 was mainly driven by cancellation of the €74,000,000 on bonds held in October 2024 in relation to the partial refinancing of the Link01 bond. Trade on the receivables was reported at $1,600,000,000 and include the seller’s credit and earn out related to the divestment of Messers Broadcast totaling $286,000,000 which is due in the second quarter this year, which is the main driver for the increase together with currency adjustments of $48,000,000 and $32,000,000 related to acquisitions. Underlying development was positive following termination of low value traffic and improved collections. Cash reserves were reported at $2,500,000,000 and expanding year over year mainly from contribution from the US divestment with $2,200,000,000 received in the first quarter, 2024. Cash generated from operations and partly offset by buyback programs for owned bonds and shares as well as closed acquisitions.

During the quarter, Link acquired owned shares worth 36,000,000 and concluded the share buyback program. While the consideration net of cash paid for Reach Data acquisition in The UK was 37,000,000. The cash outflow impact of the partial refinancing was $33,000,000 in the quarter related to call premium and transaction fees. Reported tables was close to $1,500,000 for a slightly time year over year with contribution from acquisitions adding $14,000,000 and currency effects adding another $55,000,000 underlying decrease reflecting normal fluctuation timing of payments mainly to mobile operators. Net interest bearing debt is reported at €994,000,000 calculated in accordance with our bond agreement with gross debt related to the two outstanding bonds totaling €296,000,000 The remaining €171,000,000 LINK01 bond matures December and is reclassified to short term borrowings from this quarter and is expected to be refinanced at a lower level in due time.

Quarter over quarter, net debt was marginally up despite extraordinary cash out flows of more than $100,000,000 related to the acquisition of Reach Data, share repurchase and refinancing related cash outflows, which was offset by the strong operational cash flow. Leverage end of twenty twenty four was reported at 1.3 times LTM pro form a adjusted EBITDA or slightly down from the previous quarter. The receivables, seller’s credit and earn out related to the divestment of message broadcast due in the second quarter totaling $286,000,000 is not deducted in net debt calculation according to bond terms. Including these receivables, leverage would be at one time LTM pro form adjusted EBITDA end of twenty twenty four. Further to the last slide and an overview of key operational cash flow items.

In the quarter, we report a strong cash flow from operations of $166,000,000 or close to 80% of adjusted EBITDA with a slight positive net impact from interest received and other working capital items in the quarter. CapEx was reported at $41,000,000 with the impact of $3,000,000 related to acquisitions closed during 2024. Second half CapEx was somewhat elevated compared to first half as selected CPaaS solutions will have been fast tracked to secure closing of customer contracts. Interest payments at a lower level than normal due to the cancellation of own bonds held totaling €74,000,000 and refinancing €125,000,000 of LINK02 into the LINK02 bond which have quarterly interest payments compared to biannual in LINK01. And hence, approximately 50,000,000 in interest paid have been shifted to first quarter twenty twenty five.

On an LTM basis, free cash flow after CapEx and interest paid was close to $400,000,000 Following the partial refinancing, we still reiterate that the financial policy remains of net debt not exceeding two to 2.5 times LTM pro form adjusted EBITDA, which still gives ample room for executing on the inorganic growth strategy. That completes the financial section. Now we open up for Q and A. Please post questions online. Okay.

We’ve seen some questions. We’ll start off with some questions from Eistan in ABG. The first one, was there some specific reason for the lower GP from new contract wins year on year or just normal fluctuations in contract sizes?

Thomas Bargue, CEO, Link Mobility: No. There were no specific reasons for it being slightly lower than the target of 40,000,000 NOK. It was more, as Isad is mentioning, normal fluctuation, basically.

Martin Evarchin, CFO and Head of Investor Relations, Link Mobility: Yeah. Second one, do you see potential for larger developed acquisitions in Europe, or would you need to go outside Europe to do larger M and A?

Thomas Bargue, CEO, Link Mobility: We do see opportunities for level of acquisitions in Europe, but that doesn’t necessarily mean that they’re only in Europe. It can the company can be located outside Europe and also have a significant footprint in Europe. So there are still opportunities for M and A in Europe.

Martin Evarchin, CFO and Head of Investor Relations, Link Mobility: And we’ll move to some questions from, Kristans Petal in Arctic. And the first one on the specific fishing incident in Q4 is NOK 80,000,000 the maximum loss or could there be more? I can take that one. That is the, the max exposure that we have recognized. There is no further exposure on that incident.

The second question from Kristen is, can Link do anything to mitigate operator price increases?

Thomas Bargue, CEO, Link Mobility: Normally, our Link always transfers mobile operator price increases to our customers. That is mirrored in our customer agreements. We, of course, do what we can to avoid mobile operator price increases in advance if possible. It varies from country to country. In some markets, we have a better opportunity to avoid mobile operator price increases like in Italy, for example, where we negotiated with the Italian mobile operator and got a much more favorable outcome than what the mobile operator initially flagged.

Martin Evarchin, CFO and Head of Investor Relations, Link Mobility: And and the third one from Kyrgyzstan is, given the higher share of CPaaS in new contracts, does this imply a higher risk of growth materializing given that RCS only has partial support across Europe?

Thomas Bargue, CEO, Link Mobility: We’ve been fairly restricted when we estimate the gross profit from the CPaaS contracts. In many instances, we only include license fees. If we quit volumes, it’s because we have very specific guidance from the customers. So I don’t think that necessarily the risk profile is higher, but we do see that it takes a little bit longer to scale those contracts. So

Martin Evarchin, CFO and Head of Investor Relations, Link Mobility: it

Thomas Bargue, CEO, Link Mobility: might take a link longer to sort of get the full gross profit potential in the P and L.

Martin Evarchin, CFO and Head of Investor Relations, Link Mobility: And we’ll take some follow-up from Stan in ABG. Have you seen any changes in the competition for

Thomas Bargue, CEO, Link Mobility: competition. It’s more or less on the Link, which is interested in acquiring companies in our industry right now, and we haven’t seen a change on that.

Martin Evarchin, CFO and Head of Investor Relations, Link Mobility: And the last one from Estan so far is, are there anything special in the comparable numbers for H1 twenty twenty five, or should we expect growth in line with your guidance of high single digit organic growth? I can maybe comment on that. When it comes to sort of the gross, we focus on gross profit. First half was fairly normal quarters for us. As we presented on net retention, we expect that to sort of normalize after q two once we sort of faded out the strong comparables on this low margin high volume clients and the termination of traffic in global messaging.

Then, we’ll move to some follow ups from Christian had a follow-up. EBITDA contribution from a card company is similar to Link’s recognized m and a expense. How do you weigh the benefits from smaller bolt on acquisition versus the M and A expense, M and A activity taking some of our management focus away from organic growth?

Thomas Bargue, CEO, Link Mobility: Yeah. I can start with the with the last part of the question, and maybe, Martin, you can go into the details on M and A expenses and the contribution from the EBITDA contribution from the acquired targets. The benefits from smaller bolt on acquisitions are quite large, actually. And it doesn’t take away the focus of top management. At least, I am, of course, involved in reviewing the bolt on opportunities that we’re having and which want to acquire and want to pay for them.

But when you look at the onboarding, it’s handled by local management in Spain or in UK, so that is happening quite efficiently. And also the bolt ons, they give us more capacity in a certain country. We get more resources, more people, more customers and more opportunities to find growth.

Martin Evarchin, CFO and Head of Investor Relations, Link Mobility: Yes. I alluded to my section about 15,000,000 is related to to closed opportunities. Fair share of that is coming from what we closed this year. There are also some some runoff costs on all the projects and some related to the podcast divestment, which I will book also booked in in the fourth quarter. While 5,000,000 is related to to ongoing processes and especially the the four targets which are in a due diligence stage.

And then I have some some other questions from other listeners. There’s a question here. How will AI influence on your business?

Thomas Bargue, CEO, Link Mobility: Yeah. AI, we have we have already introduced AI into our products. The chatbot solution is combined with AI, and we are selling that. So this is sort of in the beginning phase, of course, of the product. And it’s only the sort of more first movers who are interested in experimenting with these kind of solutions.

And as I said, we are also now working on AI when it comes to the content generation of the more complex campaigns and communications. So AI is something we’re working on.

Martin Evarchin, CFO and Head of Investor Relations, Link Mobility: And that’s a there’s a follow-up. And and when will you be able to pay dividends?

Thomas Bargue, CEO, Link Mobility: The bond agreement from 2020 prohibits us from paying dividends. When that is being refinanced, the company would will give some more clarifications on the on our intentions regarding that topic. That is expected they happen later on in 2025.

Martin Evarchin, CFO and Head of Investor Relations, Link Mobility: Yes. I can just comment that there’s a limitation there in the in the Link zero one bond agreement. At the Link zero two, there’s more room for for dividend or it gives more dividend capacity, basically. So, as Thomas said, once we refinanced the last year of Link zero one, we will come back with an update on dividend policy. And some some other questions.

Congrats on yet another solid quarter. Clearly, the company has ample flexibility to address the final outstanding on the bond issue in December. How should we think about company’s cash position and liquidity beyond 2025? What is a reasonable long term liquidity position? And is some revolving facility not a better option having so much cash on the balance sheet?

Thomas Bargue, CEO, Link Mobility: Yeah. I agree. We have too much cash on the balance sheet right now. This is not necessarily something we were aiming for. It was a result of the disposal of message podcast in January 2024.

When we do refinance the bond, we have said that we expect a larger sum also to be downpaid on the outstanding linked zero bond. And after the refinancing, we will, of course, have much less liquidity on our bank deposits. The long term liquidity need of the company when you exclude M and A is around $400,000,000 or $500,000,000 And then sort of we will get back to how we want to sort of add flexibility for acquisitions that can be done with a smaller sum on the bank statements, or it can be done through an RCF. That’s something we will get back.

Martin Evarchin, CFO and Head of Investor Relations, Link Mobility: Yep. Then it’s a question from from Ula in Pareto Securities. Do you have an update on the operator price dispute from q three? Yes. We, as we mentioned earlier today, we, we are also writing that in the report.

We have come to agreement, as Thomas said, with the operator after negotiations, and we have fully reversed the additional accrual of around 3,000,000 that we recognized in in the third quarter. So that is reversed in in the fourth quarter financials as reported. And there, let’s see if there’s some additional questions coming in. Yeah. Then there is questions from Olivier Isani in Carnegie.

Could you comment on the operating momentum so far in the first quarter?

Thomas Bargue, CEO, Link Mobility: Yeah. Basically, sort of, we have given a range for what to expect in 2025, and we wouldn’t have given that range if we saw a deviating development or expected a deviating development in Q1. So it’s in line with the high single digit gross profit growth and a higher EBITDA growth than gross profit growth.

Martin Evarchin, CFO and Head of Investor Relations, Link Mobility: Yep. And there’s a question on M and A. Is there any plan to expand the M and A pipeline, or will the existing prospects be closed first?

Thomas Bargue, CEO, Link Mobility: No. We are shifting targets in the pipeline as we see progress are made or not made, especially if the progress is not made, then so that we can exclude one target that was prioritized and add another one. So from time to time, there are changes in the pipeline based on the development.

Martin Evarchin, CFO and Head of Investor Relations, Link Mobility: Yeah. Then there is a couple of questions from, Minay Baldavai in, Kantor. First One is, within your own internal forecast for gross profit growth this year, what are some of the key factors or trends that you’re watching which would either result in you achieving upper end or the lower end of your organic profit growth target? Yeah. I think, sort of how you see the market now.

It is, we are still getting the market is developing positively. There is a growth in the market as we see from, how how sort of the penetration adoption rates are developing. When it comes to RCS, we are a bit more prudent there internally when it comes to how fast this will be rolled out. And, but we are ready. We have the products ready to to to serve the clients on RCS as we’re doing in some markets.

We also see some traction in The Nordics, which is basically new to RCS, but we don’t have the full reach to deliver RCS. So we believe as long as the market remains fairly normalized, we don’t see huge downside to delivering on our growth ambitions. But, of course, we need to deliver on sales and get the contracts into the into the P and L. There are some let’s see if we have some follow ups now. Yeah.

There’s another one from Vinay. One of your competitors reported today with some quite positive commentary on RCS market. Can you give a sense of a percent of your traffic currently comes from RCS? That is fairly limited. It’s a small share of the 6,000,000,000 that we’re sending in the quarter, but it has healthy margins.

So it is contributing positive to the gross profit growth. That was the question we had so far. Let’s give it some seconds to see if there’s some, some follow ups.

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