Earnings call transcript: Sinch AB beats Q1 2025 forecasts, stock surges

In the first quarter of 2025, Sinch AB reported earnings per share (EPS) of $0.615, surpassing the forecast of $0.57. Revenue also slightly exceeded expectations, coming in at $7.05 billion compared to the anticipated $7.04 billion. Following the release of these results, Sinch AB’s stock saw a notable increase of 9.69%, reaching a price of $25.93 in pre-market trading. According to InvestingPro analysis, the stock appears undervalued based on its Fair Value calculations, with analysts setting a consensus price target suggesting further upside potential.

Key Takeaways

• Sinch AB’s Q1 2025 EPS and revenue both exceeded forecasts.
• The company’s stock surged nearly 10% in pre-market trading.
• Strong growth in net sales and improved margins were highlighted.
• Sinch AB continues to innovate with AI-powered tools and services.
• The company is targeting significant organic growth by 2027.

Company Performance

Sinch AB demonstrated robust performance in Q1 2025, with net sales growing by 4% year-over-year and adjusted EBITDA increasing by 12%. The company’s strategic focus on technology and innovation, particularly in AI-powered solutions, has contributed to this growth. Sinch AB’s efforts to optimize costs and renegotiate supplier agreements have further strengthened its financial position.

Financial Highlights

• Revenue: $7.05 billion, up 4% year-over-year
• Earnings per share: $0.615, exceeding the forecast of $0.57
• Gross margin: 34%
• Adjusted EBITDA margin: 13%
• Net debt to adjusted EBITDA ratio improved to 1.4x

Earnings vs. Forecast

Sinch AB’s Q1 2025 EPS of $0.615 surpassed the forecast of $0.57, marking a positive surprise of approximately 7.9%. This performance reflects the company’s ability to manage costs effectively while driving revenue growth. The slight revenue beat, with actual figures of $7.05 billion against a forecast of $7.04 billion, underscores Sinch AB’s stable market position.

Market Reaction

Following the earnings announcement, Sinch AB’s stock surged by 9.69% to $25.93 in pre-market trading. This movement reflects investor confidence in the company’s financial health and strategic direction. The stock’s performance is noteworthy, considering its 52-week range, and aligns with broader market optimism.

Outlook & Guidance

Looking ahead, Sinch AB remains committed to achieving 7-9% organic growth in net sales and gross profit by 2027. The company plans to expand its enterprise capabilities and continue developing its AI and email services. Sinch AB’s focus on strategic partnerships and innovation is expected to support its midterm targets.

Executive Commentary

CEO Lorinda Pang stated, "We delivered improved growth and stable margins in the first quarter." She emphasized the importance of Q1’s results as a foundation for achieving midterm guidance. Pang also highlighted the company’s commitment to "executing our plans and winning in the areas we have the right to win."

Risks and Challenges

• Potential market saturation in core communication services.
• Dependence on strategic partnerships for growth.
• Macroeconomic factors that could impact global operations.
• Technological shifts requiring ongoing investment.
• Competition from emerging tech companies in the AI space.

Q&A

During the earnings call, analysts inquired about the company’s RCS (Rich Communication Services) strategy, noting that it currently represents only 1% of SMS volume. Sinch AB also discussed the addition of two new email clients, which will handle 100 billion annual email messages. The board’s consideration of a share buyback mandate up to 10% was another focal point of interest.

Full transcript - Sinch AB (SINCH) Q1 2025:

Conference Moderator: Mode. Now I will hand the conference over to CEO, Lorinda Pang, and CFO, Jonas Dahlberg. Please go ahead.

Lorinda Pang, CEO, Cinch: Thanks very much. Hello, everybody. Appreciate you joining us here today. Let’s quickly jump into things and move to Slide two to look at the highlights for the quarter. I’m pleased to share that our first quarter results for 2025 demonstrate momentum across our key financial metrics and transformation initiatives.

In q one, we continue to deliver on our growth agenda with net sales and gross profit both increasing by 4% year over year. On an organic basis, this translates to 3% growth in net sales and 2% growth in gross profit. This marks our third consecutive quarter of organic net sales growth. We delivered organic growth in gross profit across all regions and all product categories, reflecting the improving execution in our business. Our performance metrics remain solid with a gross margin of 34% and an adjusted EBITDA margin of 13%, in line with our midterm guidance range.

Adjusted EBITDA increased organically by 8% year over year, driven by gross profit growth combined with reduced operating expenses, demonstrating our commitment to balancing efficiency with strategic investments. It also reflects meaningful progress on our transformation agenda across go to market, product integration, and operational excellence pillars. The efficiency measures implemented last year have not only successfully mitigated inflationary pressures, but are now yielding tangible operational improvements. This disciplined approach has strengthened our financial resilience in an uncertain macroeconomic environment while creating headroom for strategic investments in growth areas. Moving on to cash and balance sheet.

Cash conversion was 50% for the last twelve months, positioning us in the upper part of our 40% to 50% target range. Cash flow from operations after investments was a negative 104,000,000 krona, which was affected by a temporary working capital increase of 370,000,000 krona driven by a cost optimization agreement with one of our larger suppliers. While this agreement positively affects our gross margin and provides stability going forward, it has a short term negative cash flow impact, which is expected to gradually normalize in the coming quarters. Our balance sheet continues to strengthen with our net debt to adjusted EBITDA ratio improving to 1.4 times, down from two times in q one of twenty twenty four. This gives us greater financial flexibility to pursue our value creation agenda.

We’ve talked a lot about our transformation and integration agenda over the past year, and I’d like to pivot to talk about examples of the innovations we are driving. Email and RCS represent two prioritized growth opportunities. And in this quarter, we have launched new AI related functionality for both Mailgun and Mailjet. We made RCS generally available in our conversational API product, and I’ll come back to all of these later. Beyond, though, beyond our core product in innovations, we have developed practical AI solutions that deliver measurable business impact.

Our our internally developed support chatbot now resolves 65% of customer email and messaging inquiries without human intervention. Similarly, our AI powered agent assistance technology has improved live chat resolution times by 20% while enabling multilingual support capabilities for our engaged customers in EMEA. These innovations demonstrate how AI remains an integral part of our strategy to deliver growth, efficiencies, and enhanced customer experiences. Moving to the next slide, we’ll look at the region’s performance. Let me start with The Americas, which delivered solid results with 4% year on year organic growth in North net sales, though gross profit growth was more modest at 1%.

The region maintained a stable gross margin at 34%, and I’m particularly pleased to see gross profit increased across all product categories compared to the same time last year. Our network connectivity business, which is dominated by network voice services, showed notable improvements driven by new commercial agreements with both customers and suppliers. We are seeing traction in multiproduct usage. One example is LiveVox, a leading contact center platform who implemented Cinch’s elastic SIP trunking to unify their voice and SMS operations. This integration enabled SMS numbers for voice callbacks, streamlined channel management through a single dashboard, and enhance the customer journey through seamless cross channel communication.

Turning over to EMEA. We previously mentioned that we expected to begin seeing underlying growth in EMEA API platform, outpacing the negative impact of some fixed price contracts we exited in 2024. The improvements commenced in the fourth quarter and continued also in q one. Overall, the region delivered 7% organic growth in net sales and 3% organic growth in gross profit. Gross margin was 31%, down slightly from 33% in the comparable period.

We experienced divergent performance across our product segments with API platform and applications showing strong growth, while network connectivity was impacted by the timing of some project based contracts, which are expected to normalize throughout the year. There was significant momentum in RCS and email wins as well as partner led growth this quarter, which positions us well for future growth in the region. I will come back to both RCS and partners in a moment. But one compelling example of the value we are adding to the customers is the European Commission. They partnered with us to implement a chatbot solution for their Discover EU program, which provides 24 by seven automated support to young travelers across Europe.

The AI powered solution we developed together with implementation partner, Campfire, is built on chat layer by Cinch and resolves more than 80% of requests without human intervention. This successfully addresses the challenge of supporting inexperienced young travelers who need immediate assistance during their train journeys throughout The EU. Turning to APAC, we saw mixed results. Overall, we had 4% year on year organic decline in net sales driven by a reduction of low margin SMS revenue in India. This was partially offset by strong growth in the rest of Asia Pac as our investments in enterprise sales in the region are beginning to bear fruit.

The region delivered a solid 5% organic growth in gross profit. The gross profit growth was primarily driven by an improved product mix and higher gross margins, demonstrating our ability to adapt to market conditions and focus on higher value offerings. One demonstration of the success we are enabling in the region is OZMobiles, a leading Australian mobile phone retailer who implemented Cinch Engage to optimize their SMS marketing strategy. They selected Cinch for our seamless platform integration with their existing tech stack, including Shopify and Klaviyo CRM. This implementation delivered exceptional results, including a 3000% ROI on targeted campaigns like their Valentine’s Day promotion and meaningful annual marketing cost savings.

Overall, I’m encouraged by the performance in each of the regions this quarter. The product mix improvements and commercial initiatives are starting to yield results, creating momentum as we move further into 2025. Next slide, please. Cinch is profitable and cash generative. We are focused on profitable and sustainable growth organically and through m and a.

As such, our value creation agenda is underpin underpinned by three essential components, growth reacceleration, EBITDA margin expansion, and active capital allocation resulting from continued strong cash generation. We’ll cover aspects of each of these throughout the call. As a reminder, we are targeting 7% to 9% organic growth in both net sales and gross profit with adjusted EBITDA margins of 12% to 14% by the end of twenty twenty seven. These growth rates reflect an ambition to grow faster than the market in each product category. Additionally, our financial leverage policy states net debt over time shall be below two and a half times adjusted EBITDA measured on an LTM basis.

Now I wanna take a moment to reiterate the inputs to unlocking our growth reacceleration, enterprise expansion, self serve capabilities, RCS and email, as well as partners and ecosystems. I’d like to share some of the strong activity and tangible results in each of these areas. So let’s move to the next slide as we talk about enterprise expansion. The number of large enterprise customers increased by 5% year over year. Our definition of large enterprise consists of customers representing more than 2,000,000 krona in gross profit annually.

The growth in large enterprise customers is important for several reasons. First, enterprise customers typically provide superior customer lifetime value than smaller customers. They provide stability and predictability to our revenue streams with a longer contract terms and higher retention rates than smaller accounts. Second, these relationships typically expand over time as enterprises deploy our solutions across additional use cases, geographies, and business units. This land and expand approach drives organic growth with lower customer acquisition costs when compared to complete greenfield customers.

Third, enterprise customers help validate our market position and technology leadership, making us more attractive to other potential large customers and strengthening our competitive moat. Moving to the next slide where we’ll discuss self serve. When it comes to self serve, it has emerged as a powerful growth driver, evidenced by the 13% year over year gross profit growth in q one. There are tens of thousands of customers in this category, generating high gross margins and representing more than 15% of GP. It is easy to think of self serve as primarily an SMB motion, but self serve capabilities has become a key purchasing criteria for enterprise customers as well.

Technical as well as business decision makers do a lot of self discovery and testing before engaging with potential suppliers. Further, increasing self usage rates demonstrates strong product market fit and indicate lower friction in customer onboarding and expansion. This translates to improved unit economics as customers can discover, implement, and scale our solutions with reduced dependency on our customer success or sales resources. Let’s now look at RCS on slide seven. I’m excited to share the momentum we’re seeing with RCS, which represents a transformative opportunity for both Cinch and our customers with the potential to turn every message into an experience.

I mentioned in the intro that in q one, RCS was made generally available in conversation API, and we also launched our RCS business enablement service. This new offering helps carriers seamlessly launch, operate, and monetize RCS for business, addressing previous barriers to adoption. Our enhanced CinchBuild dashboard now allows businesses to create, test, and deploy RCS agents in just a few clicks using our upgraded provisioning wizard. This democratizes access to rich messaging capabilities that were previously complex to implement, opening the technology to a much broader market. Our strategic presence across key industry events, including Mobile World Congress in Barcelona, Enterprise Connect in Orlando, Adobe Summit and ShopTalk in Las Vegas, and our Google partner, New York Showcase, has amplified our RCS market positioning.

We showed carriers how to monetize, enterprises how to enhance customer engagement, and technology partners how RCS integrates seamlessly into existing marketing stacks. These events further establish Cinch as the connective tissue in the RCS landscape, driving both awareness and pipeline growth. In q one, the number of RCS messages exceeded 600,000,000, which meant an approximate 50% increase versus the last quarter of twenty twenty four, and active activity continues to accelerate. Let’s turn to the next slide, please. Our email business continues to demonstrate exceptional strength and innovation, validating our multichannel strategy.

We’ve delivered 165,000,000,000 emails in q one alone, corresponding to double digit volume, revenue, and gross profit growth. This continued growth reflects both market confidence in our email solutions and our success in expanding customer relationships. This is particularly noteworthy in a mature market segment. Please note that our self serve email business is captured in our self serve category in our financial reporting, which has been a key driver of predictable revenue growth. But email is more than self serve.

As an example, in q one, we successfully completed onboarding of two major enterprise customers in the retail and transportation sectors. These implementations alone represent more than 100,000,000,000 annual email messages, demonstrating our ability to win and implement large scale enterprise deployments. They also demonstrate cross selling success as both clients were originally large SMS only customers. From a partnership perspective, Mailgun has teamed up with Redsift to expand the email security offering to include free domain based message authentication reporting. This enhancement addresses growing concerns around email security and deliverability, providing our customers with enterprise grade protection without additional cost, which is a compelling differentiator in the market.

Our product teams have delivered significant innovations this quarter, which I mentioned earlier. First, Mailgun’s open source model context protocol or MCP transforms how businesses access email analytics. Instead of leveraging complex dashboards or technical queries, users simply ask questions in everyday language to get the insights they need. This means anyone, from marketing teams analyzing campaign performance to developers troubleshooting delivery issues to customer support teams investigating message status can immediately access powerful email insights without technical expertise. Second, Mailjet has introduced AI powered content tools that make email creation dramatically faster and easier.

Users can automatically generate professional templates, create compelling content in nine different languages, and track performance with enhanced analytics, all without specialized design or marketing expertise. For businesses, this means faster campaign deployment, consistent brand presentation, and more effective email programs, ultimately strengthening customer relationships, all contributing to higher customer satisfaction and stickiness. Moving on to slide nine, where we’ll talk about partners and ecosystems. We are experiencing strong momentum across partners and ecosystems. We’ve seen solid growth in partner driven new local acquisition, demonstrating the effectiveness of our collaborative approach.

Our partner driven business meaningfully outperformed overall GP growth in the first quarter, highlighting the leverage and scale our partnerships provide. Our ecosystem strategy continues gaining industry validation through prestigious recognitions, including Adobe’s technology partner of the year award for the third consecutive year, HubSpot’s essential app designation, and expanded SAP collaborations. These partnerships position Cinch as the embedded communications layer within enterprise technology stacks, delivering measurable value through seamless integrations and enhanced customer experiences. We are actively pursuing a further expansion of our partner network. Our approach is targeted, focused on expanding partnerships in prioritized markets and verticals to maximize impact.

Our partnership with OneReach.ai exemplifies our strategy to simplify access to and benefit from AI in customer communications, opening up new avenues for innovation and value delivery. This strategic collaboration enables businesses to rapidly build AI agents that handle complex interactions using real time data across systems, dramatically accelerating time to value. It is an example of a leadership position we are moving towards empowering the next generation of AgenTeq AI with enterprise grade architecture, scale, and global presence. Now with those remarks, I’d like to hand the word over to Jonas to take us through more details on the financials.

Jonas Dahlberg, CFO, Cinch: Thanks a lot, Lorinda. And, although I joined Singe just, the first day of the second quarter, it’s really my pleasure to, present the team’s results of the first quarter. So let’s jump straight into it, starting with the top line. Revenue growing 4% year over year, and of this, you know, three percentage point was organic. Good news here is the third consecutive quarter of organic growth.

And as you also can see, we’ve now passed the previous all time high on revenue on an LTM basis. Moving over to gross profit, next slide that is. We had a similar 4% growth in the quarter, of which 2% was organic. What you can see here also is a longer trajectory of positive development on an LTM basis, and this is driven by a gross profit margin expansion, which I’ll come back to in a bit. Positive here in the quarter, if we move over to the next page, is that the gross profit growth is driven by basically all regions and all product categories.

The biggest gainers in the quarter was APAC with a 5% organic growth year over year as well as applications in the product categories. Now, what’s also good to see here, is that network connectivity is back, with a 2% organic GDP growth. And I actually want to double click a little bit on the network connectivity business. So and in particular, connectivity Americas, which is predominantly network voice in The US. So what you can see here is a development where we had a few tough quarters, but now we’re getting back to growth.

And I’d like to explain a little bit more what’s what’s going on here. So we had a decline for a few quarters due to two reasons. The first one was a reform of toll free interconnect by the FCC, and this had an impact on pricing. This is washed through the numbers now, so it’s done and over with. And the second thing is phase out of legacy TDM, that’s time division multiplex technology, in the infrastructure, which has impacted our cost as suppliers increased cost quite a bit.

Now what’s going on here is we’ve renegotiated with suppliers. We’ve renegotiated also with customers, and we’re shifting out this technology for IT. And what you can see here is, the positive developments of, basically, those two trends reversing. So, very good news regarding network connectivity. Leaving, gross profit and move over to EBITDA.

So we have, first looking at OpEx, adjusted OpEx. You can see that adjusted OpEx is essentially flat in the quarter. In fact, if you look at currency adjusted basis, adjusted OpEx is down one percentage point year over year. And this is a result of the cost savings program we had last year as well as integration efforts paying off, with higher scalability, in the business as we, take out synergies from our integrations. And what I’d like to say is we don’t see any visible market weakness following the macro uncertainty from the tariff discussion in The US, But we stay very vigilant when it comes to cost, and we will manage this very carefully as we continue to monitor the development in the marketplace.

But important to say, we don’t see any weakness. And now the the positive effect here is the GP improvement, we had in the quarter essentially fully drops down to adjusted EBITDA. So, 4%, GP growth translates into 12% adjusted EBITDA growth, and 8% of that is organic. Again, I’d like to double click a little bit if we move over to next page, so you can see the bridge between adjusted EBITDA and EBITDA. And as said, we had a strong improvement of adjusted EBITDA, 95,000,000 compared to the same quarter last year.

The important point here is that integration and restructuring cost essentially is unchanged if you look at that in combination. It’s just SEK 1,000,000 increase compared to last year. And really, the swing factor here is FX effect. It’s revaluation of balance sheet items that impacts nominal EBITDA. And last year, we had a forty three million positive on EBITDA and this year, a negative 67,000,000.

So, the swing is 110,000,000. Important, I think, just to get clarity, where, the difference is coming from. Leading EBITDA, moving over to the margins. As you can see here, the positive trend in gross margin, and this is to a large extent due to positive mix effects. So our applications have higher margins, and they’re growing faster than the rest of the mix, as an example, and also APAC, stronger margins, and this has a positive impact on gross margin.

And this also translates to improvements of adjusted EBITDA margins, as you can see from this chart. Moving to the next page. Now going into more of, balance sheet items. We continue to strengthen the balance sheet. Net debt to EBITDA, 1.4 in the quarter.

That’s down from 1.5 end of the year. And in line with our capital allocation strategy, the board has asked AGM for a mandate for share buybacks. And I think this is a testimony of the strength of of the balance sheet, really. Next page, looking at the cash conversion. It’s at the upper end of our cash conversion target, 50% cash conversion over last twelve months.

So that’s very positive. But we have a bit of a working capital swing, which impacts cash flow in the quarter. And I’d like to go a little bit more into detail into that as well so you get comfort that this will normalize. So next page. What you see here are both the current asset and current liabilities items of working capital.

And the first thing I’d like you to pay attention to is the solid line in the middle, which shows that, you know, our working capital over time is essentially nil, but there are some swings. And the swing we have now seen over the last quarter is within normal variations. In fact, if you look at accounts receivables, it’s actually a positive development. So the swings really come from two factors in the quarter. The first one is we had a very high level of payables end December, and that now swung back.

And the other thing is a temporary increase of other receivables. This is a prepayment to a supplier of 370,000,000, which is related to this improvement that we saw in the network voice business. We expect this to normalize over the year, and we don’t see any structural shift in working capital. And hence, we are confident about cash flow also going forward. And, with that, I’m handing back to Lorinda for some final remarks and then q and a.

Lorinda Pang, CEO, Cinch: Terrific. Thank you so much. So before we go there, let let me summarize the quarter. Cinch developed, delivered, I beg your pardon, we delivered improved growth and stable margins in the first quarter. This is the third consecutive quarter of year over year organic net sales growth, and we delivered organic gross profit growth in all regions and product categories.

We improved gross margins and adjusted EBITDA margins with adjusted EBITDA increasing 8% organically year over year. Our financial position continues to strengthen, and we delivered rolling twelve month free cash flow at the top of our guidance range. We are making meaningful progress on our transformation agenda. Our leadership position has was reconfirmed this quarter by IDC and Omnia with specific emphasis on our RCS and AI enabled customer communications offerings and strategy. We are focused on executing our plans and winning in the areas we have the right to win.

Enterprise expansion, self serve, RCS and email, and partners and ecosystems. And as you’ve heard throughout today’s presentation, we are making meaningful progress across each of these strategic priorities, translating our transformation efforts into tangible market advantages and customer successes. Our execution in q one was an important building block towards our midterm guidance of 7% to 9% organic growth by the end of twenty twenty seven. So with that, I want to, thanks thank you to everybody for listening, and let’s open up the call for questions, please.

Conference Moderator: If you wish to ask a question, please dial pound key The next question comes from Eric Lindholm, Rojessel from SEB. Please go ahead.

Eric Lindholm, Analyst, SEB: Yes. Good good afternoon. Welcome, Jonas. Thank you for taking my questions. Wanted to to start on the optimization agreement that you did with one of your largest suppliers here, which I guess was in Americas.

How much did this contribute to your gross profit growth this quarter? And did we see the full impact here in Q1? Or should we see a more significant impact in the coming quarters? And then a follow-up as well. So organic gross profit growth continues to improve, and it looks like some of your peers are also seeing accelerating growth.

But do you think the improved trends that you’re seeing here are sort of mainly a result of a better market? Or is this more so a result of internal initiatives? You.

Lorinda Pang, CEO, Cinch: Hi, Eric. Thanks for the question. I’m gonna start with your second question, and then I’ll ask Jonas to talk about the optimization agreement. So to your point, I think the the market is certainly seeing signs of strength, which is very positive. But I think that our execution has improved, and it needs to continue to improve for us to take full advantage of the of the opportunity out there.

And, as I said in my closing remarks here, I do think that q one was a good step in the right direction. But as you know, our our midterm ranges are seven to 9%. So we have a little ways to go, to get there.

Jonas Dahlberg, CFO, Cinch: And to your second question, so what was the impact of this supplier agreement in network voice in The US? So what I’d like to say is in, you know, in combination of renegotiated terms with both customers and suppliers, and we’ve started to shift technology from to them to IP, that, you know, was really what elevated our gross profit with 6% in Network Americas. So we’re not singling out, you know, that specific supplier, but it has a very meaningful contribution to the gross profit development.

Eric Lindholm, Analyst, SEB: All right. Just one more follow-up, if I may. You mentioned, Lorinda, that you’re sort of creating momentum as you move further throughout 2025. Should should that be interpreted as you’re seeing sort of accelerating organic gross profit growth throughout the year? Or how should we interpret that?

Lorinda Pang, CEO, Cinch: Yeah. Sure. Thanks, Eric. I would just reiterate our midterm range is seven to 9%, and, you know, I think you should think about it as this was the first step in that direction. There’s there’s a bit of time between now and the end of twenty twenty seven, and we will move there gradually.

Daniel Thorson, Analyst, ABG Sundal Collier: Okay. Now I’ve got Okay. Thank you. Thank you.

Conference Moderator: The next question comes from Daniel Thorson from ABG Sundal Collier. Please go ahead.

Daniel Thorson, Analyst, ABG Sundal Collier: Yes. Hi. Thank you very much. First one on RCS messages. You mentioned SEK 600,000,000 here in Q1, up 50% versus Q4.

Is it possible to quantify this in either sales or gross profit SEK 1,000,000 or as a share of the business today? But also adding on where could that share be two, three years out?

Lorinda Pang, CEO, Cinch: Hi, Daniel. As you know, we’re we’re very bullish on RCS overall over the long term. We think it is, you know, really the next generation of SMS. The 600,000,000 volume really compares to the SMS business itself. It’s very small.

Right? It’s only 1% in comparison to the overall SMS volume that we send. So, it has very little impact on the financials at this moment in time. What it does do is it secures customers, and it enables customers to advance or to get to the next generation, right, and to continue to upgrade, how they’re engaging with their customers. So we continue to be bullish on it, and, you know, we have expectations for this to continue to accelerate.

Daniel Thorson, Analyst, ABG Sundal Collier: Okay. That’s that’s clear. Another one on email here. You mentioned the two new clients you signed or onboarded this quarter covering 100,000,000,000 annual emails together. It seems to add some 15% to the current run rate of e mails sent in Q1 alone, meaning that without any meaningful churn, obviously, near term.

But it means that you could continue to grow double digit for quite some time here in email with quite good visibility. Right?

Lorinda Pang, CEO, Cinch: So, from an email standpoint, we communicated it’s a big growth driver for us. Right? We we said that during CMD, we continue to believe that. So the hundred billion in in in email from the two customers that we provisioned in first quarter is a meaningful contribution to to the business. But, you know, for these larger customers, I would say that the the margin you do take a little bit hit on the margin.

So as you know, email, generally speaking, is a relatively high margin business. But to win a customer of that volume, you do sacrifice a little bit of margin. So those are the the points of reference I would give you.

Daniel Thorson, Analyst, ABG Sundal Collier: Okay. That’s that’s very clear. And then just a final one here on financials. What what level of the total nonrecurring costs is your best guess for the full year? I know FX movements are impossible to call, of course, but a ballpark figure on the rest of the items for for full year.

Thanks.

Jonas Dahlberg, CFO, Cinch: I think you should expect the combination of integration and restructuring cost about the same level as as it is currently.

Daniel Thorson, Analyst, ABG Sundal Collier: Okay. On a quarterly basis here, for the rest of the year?

Jonas Dahlberg, CFO, Cinch: Yes. Correct.

Daniel Thorson, Analyst, ABG Sundal Collier: Excellent. Thank you very much, and and welcome, Jonas.

Jonas Dahlberg, CFO, Cinch: Thank you so much. It’s a pleasure.

Conference Moderator: The next question comes from Ramil Khouria from Danske. Please go ahead.

Ramil Khouria, Analyst, Danske: Hey, guys. Afternoon. Thank you for taking my questions. Maybe almost philosophically, 2% organic GP growth in the quarter. And Lorinda, your sort of outline of all the moving parts in the presentation here, it sounds like second derivative is positive all throughout.

And Q1 was also the most difficult comp for the year. Clearly, prospects for accelerated organic growth starting as a sort of Q1 base level should be good. But what kind of visibility do you have? Like, what kind of feeling do you have for the remainder of the year beyond April, of course?

Lorinda Pang, CEO, Cinch: So, of course, as you know, we don’t guide, in the year. But, you know, some of the aspects of what we look at to understand what the future is gonna look like is certainly volumes. We look at pipeline, closed win opportunity closed won opportunities, and, you know, leading indicators around churn, or potential churn. And so at this point in time, Ramil, you know, we feel good about pipeline. The sales activities, as you can tell by net sales growth, being the third consecutive quarter, it it has been picking up.

So that’s positive. And, again, nothing has changed, in terms of that trend. But, again, I just wanna caution that we are we’re targeting seven to 9% in in at the end of 2027. So it’ll it’ll be a slow gradual climb towards that.

Ramil Khouria, Analyst, Danske: Yeah. Fully understood. Thank you, Lorinda. And then, maybe on the topic of sort of OpEx investments because, the way I read your CMD message was that 2025 would be somewhat front end loaded in terms of OpEx investments. And then you’ve been mindful of the sluggish macro environment, which is fully understandable.

But what has to change for said OpEx investments to actually materialize? Or is it rather that you’ve reallocated on the back of macro and we shouldn’t expect the investments to materialize ahead?

Lorinda Pang, CEO, Cinch: Yes. So the you know, we we have invested even in 2024 in some of the growth areas. As you can see with OpEx being relatively flat year over year on the back of 352,000,000 in gross savings, It did mean that we reinvested that back into the business, and it and it also covered inflationary increases, in the base. But we do we are being prudent here, in terms of the macro. And so we’re being very careful, in terms of our investments.

And so we will we will continue to, allocate, towards more of our growth areas, which means we have to manage the base, in a more prudent way. So it is more of a reallocation at this point. But, again, we just wanna make sure that we’re being, vigilant here.

Ramil Khouria, Analyst, Danske: Makes sense. And then finally, for me, on Network Connectivity Americas, I mean, 2023, this was a 40% gross margin business prior to the operator price hikes. And throughout 2024, you managed to recover some of that element. But gross margins remain in the sort of in the mid-30s. And I can see sort of the reasoning about mitigating it by raising prices to offset the impact on gross profit and then maybe taking a somewhat of a hit on gross margins.

But given the move to new technology as well, should we expect the margin trajectory in that business to deviate from current levels? Or is this a sort of a new base level?

Lorinda Pang, CEO, Cinch: Well, overall, I would say, you know, we manage this business, for cash, ultimately. And we’ve said that we should expect gross margin to be roughly flat. We saw a 2% increase, and that’s the the statement, of course, is for overall network connectivity. But the margins, I would say, is, you know, relatively relatively smooth. We’re smoothing it out, and it’s in an acceptable rate for us.

Ramil Khouria, Analyst, Danske: Okay. Thank you very much, Lauren. And I’ll echo my colleagues here saying welcome to Jonas as well.

Jonas Dahlberg, CFO, Cinch: Thank you so much.

Lorinda Pang, CEO, Cinch: Thanks, Ramil.

Conference Moderator: The next question comes from Deepshika Agarwal from Goldman Sachs. Please go ahead.

Deepshika Agarwal, Analyst, Goldman Sachs: Yeah. Hi. Thanks for taking my question. So one was basically, like, the restructuring that has been put. So what are the can you just, like, elaborate on what are the initiatives that this basically is going to put into?

And how do you expect it to reflect in in your like, if there is any target in terms of any savings that you see from it that basically you’re it it you’re trying you’re trying to do, like, you know, with this restructuring. And then I think you mentioned share buybacks. So any any any further color on that in terms of any progress or in terms of discussion or any kind of indication how you’re thinking about it? And third one is more on the macro. I think overall, there is a positive sense of improvement of and I think you alluded to it being more execution, but clearly, called out a robust demand environment as well.

So anything that you would have seen over the past one month in the quarter in terms of macro that would be worth highlighting would be very helpful, especially in terms of, you know, the volumes both in terms of, like, the, like, messaging emails, etcetera etcetera.

Lorinda Pang, CEO, Cinch: Sure. Thanks, Deepshika. I’ll I’ll take a few and then hand over to to Jonas for the share buyback. As far as restructuring is concerned, we we did the restructuring last year, and we did communicate what the savings would be, and we overachieved those savings. So there’ll be you know, we’ll we’ll always see some restructuring costs, but not to the magnitude of what we did last year, which I believe was roughly about a hundred million sack in 2024.

But Jonas’s point about integration and restructuring costs, just look at them together, I think was the maybe what you heard. So when you look at those two line items together, it will be roughly at the same the same pace that we saw in q one. But no new restructuring programs that we’re announcing here today. As far as the macro is concerned, I would say a couple of things. First of all, we are not directly impacted by the tariffs themselves because those, of course, are related to goods and parts and and we’re services.

So we don’t have a direct impact. The second piece is that even if there were tariffs on services, we have very little of our volumes that are actually imported into The US. Most of our business is highly localized. So there’s, you know, very small impact if that were to happen. The second or the third thing, I guess, I would say I’m trying to keep count of myself.

The third thing I would say is that the we’re not seeing customer behavior change yet. And I would say that’s not just through March 31, but even through to today. We haven’t seen, any anything material change. That being said, I think it remains, you know, it remains prudent for us to do a couple of things. Number one, manage our costs, and and make sure we’re not leaning aggressively into cost, but rather, being prudent and vigilant about costs.

The second is with regards to our customers, in any sort of whether it’s macro uncertainty or geopolitical climates, you know, we’ve been through this before over the past several years with lots of events around the world. The great thing about what Cinch does is we support brands and enterprises across their entire customer journey. And what I know to be true during times of uncertainty is these brands need to hold on to their customers. They need to build, loyalty with their customers. And the way that they can do that is through improving the engagement and communication channels with these customers.

And, again, that’s what Cinch does. So we will be there to support them, in this time of uncertainty. And, again, up until this point, we haven’t seen a change of behavior. But, Jonas, do you wanna talk about the share buyback?

Jonas Dahlberg, CFO, Cinch: Sure. So the board has asked the AGM for a mandate for a share buyback, up to 10%, which is the statutory limit before, you need to issue a prospectus. And it is really on the back of the solid balance sheet and the strong cash conversion. And, you know, exactly how much will be repurchased is at the discretion of the board. Obviously, what they will be looking at is the strength of the balance sheet, the cash flows, and quite frankly, if they consider it to be in the best interest of shareholders.

So that’s really what I can say about the share buybacks at this moment.

Conference Moderator: The next question comes from Thomas from Nielsen. Please go ahead.

Eric Lindholm, Analyst, SEB: Thank you for taking my question. The 5% year over year increase in large enterprise customers is a key growth driver. Could you perhaps share more details on the specific industries or verticals driving this growth, and how you plan to deepen penetration within these enterprise accounts?

Lorinda Pang, CEO, Cinch: Sure. Thanks for the question, Thomas. So first of all, just to, hone in on the definition, these are customers that are spending, at least 2,000,000 sec or 2,000,000 krona annually, with Cinch. And so the the larger customers are in tech. They’re also carriers.

Financial services are probably the the three areas that I would call out as being the highest highest penetration in those top enterprise customers today. The way that we continue to unlock that for them to continue to grow as well as to add more customers into that category is really cross sell. We have, you know, some we have relationships with a lot of customers around the globe, and there’s an opportunity to grow within that base, which is a big focus within the sales organization. Our ability to cross sell and I mentioned the two customers that we just provisioned large scale email volumes with. Those customers were actually large SMS customers with us originally.

So our ability to cross sell that will be meaningful for those relationships. And so that’s the expectation with the go to market transformation that we’ve been doing over the last, year. It was to cross train, and to enable the sales organization to be able to sell the full Cinch portfolio, to both existing customers as well as to new logos.

Eric Lindholm, Analyst, SEB: Okay. Thank you very much. Very encouraging to see such a tangible result from your efforts there. Thanks so much.

Lorinda Pang, CEO, Cinch: Thank you, Thomas.

Conference Moderator: There are no more questions at this time. So I hand the conference back to the speakers for any closing comments.

Lorinda Pang, CEO, Cinch: Thanks very much, everyone. I already gave you my summary of the quarter. I appreciate the support and the interest. I welcome Jonas as well to to the team. We’re very pleased to have him on board.

And I would just say that this was an important step for us in our progress to reaccelerate growth and committing to the broader value creation agenda for Cinch. So thank you again.

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