Earnings call transcript: Sinch AB Q2 2025 shows steady growth and AI integration

Sinch AB reported its Q2 2025 earnings, revealing steady growth in net sales and significant advancements in AI integration. The company achieved SEK 6.6 billion in net sales, marking a 2% organic growth, and a gross profit of SEK 2.3 billion, reflecting a 6% organic increase. The stock remained stable, with a slight increase of 0.06% following the earnings announcement. According to InvestingPro data, the company’s shares have shown remarkable momentum with a 54% gain over the past six months, though current analysis suggests the stock may be undervalued.

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Key Takeaways

• Sinch AB reported 2% organic growth in net sales and 6% in gross profit.
• AI integration plays a pivotal role in the company’s strategic direction.
• The stock saw a marginal increase of 0.06% post-earnings announcement.

Company Performance

Sinch AB demonstrated solid performance in Q2 2025, with a focus on expanding its AI capabilities and maintaining steady growth across its key markets. The company reported a 2% organic growth in net sales, with significant contributions from its AI-driven products and services. As a prominent player in the Software industry, according to InvestingPro analysis, the company has maintained a strong five-year revenue CAGR of 42%, despite current challenges in profitability margins. This performance aligns with industry trends where AI is becoming increasingly integral to communication platforms.

Financial Highlights

• Revenue: SEK 6.6 billion (2% organic growth)
• Gross Profit: SEK 2.3 billion (6% organic growth)
• Adjusted EBITDA: SEK 869 million (8% organic growth)
• Gross Margin: 35%
• Adjusted EBITDA Margin: 13.1%
• Free Cash Flow: SEK 523 million
• Net Debt to Adjusted EBITDA Ratio: 1.3x

Outlook & Guidance

Looking forward, Sinch AB remains cautious due to macroeconomic uncertainties but is optimistic about achieving its midterm targets of 7-9% organic growth in net sales and gross profit by 2027. The company continues to focus on profitable and sustainable growth, with strategic investments in AI and other innovative technologies. InvestingPro analysis shows analysts expect the company to return to profitability this year, with an EPS forecast of $0.31 for FY2025, supporting management’s optimistic outlook.

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Executive Commentary

CEO Laurinda Pang emphasized the transformative role of AI, stating, "AI is fundamentally transforming how businesses communicate." She also highlighted the company’s strategic direction, mentioning, "We are not just adding AI features, we’re building a comprehensive intelligent communications platform."

Risks and Challenges

• Macroeconomic pressures could affect growth projections.
• Increased operational expenditures could impact profitability.
• The competitive landscape in AI and communication technology is intensifying.

Q&A

During the earnings call, analysts inquired about Sinch’s AI monetization potential and the impact of currency translation on financial results. The company also addressed its competitive advantage with 10DLC connectivity and potential M&A opportunities.

Sinch AB’s Q2 2025 results underscore its commitment to innovation and growth, with AI at the forefront of its strategic initiatives. The company’s cautious yet optimistic outlook reflects its focus on navigating economic challenges while capitalizing on emerging opportunities in the communication technology sector.

Full transcript - Sinch AB (SINCH) Q2 2025:

Conference Operator: Welcome to the Sinch Q2 report for 2025. For the first part of the conference call, the participants will be in listen-only mode. During the questions and answers session, participants are able to ask questions by dialing KEY5 on their telephone keypad. Now I will hand the conference over to CEO Laurinda Pang and CFO Jonas Dahlberg. Please go ahead.

Laurinda Pang, CEO, Sinch AB: Thank you very much, operator, and a warm welcome to everyone for this Q2 earnings call. My name is Laurinda Pang, CEO of Sinch AB, and I’m calling in today from.

Jonas Dahlberg, CFO, Sinch AB: The U.S. while our CFO Jonas Dahlberg.

Laurinda Pang, CEO, Sinch AB: Is calling in from Stockholm today. Let’s turn to slide two to look at the highlights from the quarter. I’m pleased to share that our second quarter results for 2025 demonstrate our continued resilience and steady progress even as we.

Jonas Dahlberg, CFO, Sinch AB: Continue to navigate an uncertain macroeconomic environment.

Laurinda Pang, CEO, Sinch AB: As we begin, I would call out the large FX swings we experienced in the quarter for net sales, gross profit, and costs due mainly to the weakened US dollar. As we always do, we will point you to organic changes, which normalize these FX swings and is a consistent representation.

Jonas Dahlberg, CFO, Sinch AB: Of the underlying business.

Laurinda Pang, CEO, Sinch AB: Reported net sales was SEK 6.6 billion, corresponding to a 2% organic growth rate when adjusting for the effect of foreign exchange movements, which was nearly SEK 600 million in the quarter. Organic net sales growth is an important guidepost to the underlying performance of the business, and 2% is lower than our ambition. While mix shift will help drive improved profitability, we need to do both higher top line growth in net sales and shifting our mix. Our gross profit showed a robust 6% organic growth, reaching SEK 2.3 billion. Positive organic growth was delivered by all regions and across all product categories, reflecting solid execution and our focus on higher value offerings. This is reflected in our gross margin expansion to 35% this quarter. We also demonstrated solid performance in adjusted EBITDA.

Although flat in nominal terms and on a reported basis, adjusted EBITDA increased 8% organically to SEK 869 million. EBITDA grew organically by 4% to SEK 760 million. The efficiency measures we implemented earlier this year are contributing positively, strengthening our financial resilience and creating headroom for strategic investments in key growth areas. Moving on to cash and balance sheet, free cash flow was SEK 523 million in Q2. Cash conversion was strong at 60% in the quarter, while our rolling 12-month cash conversion was just below our target range. Due to the working capital item we mentioned last quarter, we paid down SEK 480 million in debt, and our leverage ratio is now 1.3 times net debt to adjusted EBITDA. Last night, we announced the Board of Directors has activated the share buyback program after the AGM mandate was provided in late May.

These results reflect meaningful progress on our transformation agenda across go-to-market, product integration, and operational excellence pillars. Also, we are delivering improved connections for our customers through platform innovation, artificial intelligence, and strategic partnerships. For instance, we recently completed our 10DLC, or 10-digit long code, connection in the U.S., making Sinch the only provider that has full direct two-way connectivity to all tier-1 U.S. carriers for 10DLC SMS. Why is this important? Messaging continues to be our core business. These exclusive two-way connections reduce the need for customers having to rely on other CPaaS providers to act as another intermediary to connect with our carrier partners. It gives our customers lower latency, greater reliability, and enhanced compliance through direct control of registration, delivery, and carrier policies. When partnering with Sinch, our position in artificial intelligence continues to strengthen, as highlighted with the last four product innovation points noted here.

Our advancements in holistic AI capabilities remain a core driver of our strategic progress, as we’ll explore next. If you move to the next slide, please, as you’ve heard me say before, AI is not new for Sinch. For years, it has been an integral part of how we drive innovation, optimize our operations, and deliver enhanced value to our customers.

Jonas Dahlberg, CFO, Sinch AB: Today I want to show you how.

Laurinda Pang, CEO, Sinch AB: We are building on that foundation and accelerating our efforts, presenting examples of our holistic approach to AI capabilities across our platform. We believe AI is fundamentally transforming how businesses communicate and Sinch is pioneering this evolution through a comprehensive strategy that integrates AI across our entire portfolio. Our MCP implementation across core messaging, email, voice, and verification products is a foundational step. It enables AI agents to autonomously discover and execute communications across Sinch’s global platform. This is significant as it codifies decades of our communications expertise and best practice, drawing from over 900 billion annual interactions and turning them into AI understandable protocols. We are live with Claude and are actively expanding the capability to other leading AI frameworks. Next, our in-product AI innovation is delivering tangible value.

We’ve introduced conversational solution packages, which are preconfigured AI-enhanced bundles for use cases such as payment reminders, shopping assistance, and lead capture that help our customers achieve proven ROI quickly. Mailgun Inspect is revolutionizing email quality assurance with AI-powered optimization and compliance features, and our Contact Pro AI is enhancing customer interactions with new cross-channel summarization and auto-translation capabilities in 24 languages and seamless voice-to-video escalation, ensuring seamless, multilingual, and multimodal support. Our AI ecosystem expansion is crucial. We are embedding Sinch’s powerful communication capabilities directly into the platforms our customers use every day through strategic integrations like Salesforce AgentForce. Our SMS powers autonomous agents for predictive engagement and intelligent lead qualification. Similarly, our integration with Microsoft Dynamics Customer Insights enables AI-orchestrated customer journeys at scale. This strategy ensures our AI solutions meet customers where they already work, accelerating adoption and expanding our reach.

Finally, the market is validating AI’s importance and our leadership in our own flagship research-driven State of the Customer Communications Report. 97% of surveyed businesses state that they are adopting AI for future communications and underscores the urgency and opportunity in this space. Our recognition as an OMDI alita with a 95% innovation score for AI enabled conversational messaging is a strong testament to our cutting edge solutions and strategic vision. In summary, we’re not just adding AI features, we’re building a comprehensive intelligent communications platform that delivers real business outcomes backed by proven infrastructure and strategic partnerships. These efforts are underpinning our execution against our broader Sinch strategy for value creation, which we will revisit next. Next slide please. Sinch is profitable and cash generative. We are focused on profitable and sustainable growth organically and through M&A.

As such, our value creation agenda is underpinned by three essential components: growth re-acceleration, EBITDA margin expansion, and active capital allocation resulting from continued strong cash generation. 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 2027. These growth rates reflect an ambition to grow faster than the market in each product category. Additionally, our financial leverage policy states net.

Jonas Dahlberg, CFO, Sinch AB: Debt over time shall be 2.5 times adjusted EBITDA measured on an LTM basis.

Laurinda Pang, CEO, Sinch AB: A few words on progress in each of our four growth drivers before I hand over the word to Jonas. Starting with enterprise expansion, the customer base remains stable since Q1. On an LTM basis, we’re up 5%. As a reminder, this is the number of customers spending more than SEK 2 million in gross profit annually. We’ve clearly seen expansion in gross profit this quarter, but our new large customer wins have not ramped to this threshold yet. We are expected for them to do so in the coming quarters. Next, self-serve capabilities. There are tens of thousands of customers in this category generating high gross margins and representing more than 15% of gross profit and growing at double-digit rates. As evidenced by our strong gross profit growth in Q2, we are continuing to build momentum in RCS.

In the quarter, we delivered nearly 800 million RCS for business messages, which was a 27% increase over Q1. We’re also increasing the number of customers who are actively sending over 1,000 RCS messages per month. These, along with other KPIs we are tracking, are positive signs of growing adoption around the world. Email had another stellar quarter where we delivered double-digit organic growth in net sales and profitability. I’m also really pleased with the acceleration we’re driving through smarter email functionality with AI built into our offerings. The Mailgun Inspect product I mentioned earlier.

Jonas Dahlberg, CFO, Sinch AB: Being just one example.

Laurinda Pang, CEO, Sinch AB: Finally, relating to partners and ecosystems, deepening the relationship with existing partners like Salesforce, where we are natively integrating SMS into AgentForce, and Adobe, where we’re supporting RCS for business messaging in their Journey Optimizer suite, continues to be an important part of our growth strategy. Looking ahead, our continued expansion is focused on innovative solutions. We are excited about our partnership with Authvia, which is powering payment-enabled messaging across North America. Sinch will become Authvia’s default messaging provider, and with RCS messaging as a key focus, the collaboration positions Sinch and Authvia at the forefront of mobile innovation, making interactions more seamless and efficient for consumers. These integrations and collaborations are vital, as I said. They meet our customers where they already work, accelerate adoption, and they expand our addressable market with high efficiency and low incremental cost, reinforcing our commitment to profitable and sustainable growth.

With those remarks, I’d like to hand the word over to Jonas to take us through some more detail on the financials.

Jonas Dahlberg, CFO, Sinch AB: Thank you, Laurinda. In a nutshell, this is a solid quarter with positive organic development, but obscured by currency effects. I guess currency effects is the story of the quarter for many companies. You’ve heard it before, but there are different types of currency effects that.

May hit companies differently.

Before diving into the details of the financials, I’d like to talk about the currency effects impacting Sinch and what’s not impacting Sinch. The material currency impact for Sinch is translational, meaning it’s all about our reporting currency. If we would report in U.S. dollars it would look different, but the fact is we would still make as much money. Speaking of the U.S. dollar, it’s around 50% of the revenue and almost the same in terms of cost. We are currency neutral. This also goes for other currencies like the Euro, which is the second most important currency, while the Krona is a minor currency for us. That’s why we really have significant translational effects. Profitability metrics remain intact because really it’s about translation. With that having been said, let’s move into revenues.

Revenue in the quarter came in at SEK 6.6 billion, which is a 2% organic growth, and it’s the fourth consecutive quarter of organic revenue growth. All regions contributed positively to the organic growth, with Americas growing 2%, EMEA 3%, and APAC 2%. On product level, Application and Networks demonstrated organic growth, which is important as they are the most profitable product areas. In particular, we continue to have strong growth of our profitable Email products and hence, even though organic net sales growth does not impress, we continue to have a positive mix shift contributing to the increased profitability and more of that later. Nominally though, net sales is down 6% in the quarter due to the mentioned translational FX impact.

Moving over to gross profit, gross profit in the quarter amounted to SEK 2.3 billion, and that’s a 6% organic increase with about an equal contribution from net sales, positive mix shift, and increased profitability to propel the growth to 6%. This is the seventh consecutive quarter of organic gross profit growth. We’re very pleased with that. Reported numbers are down and for gross profit it’s 3% due to translational currency impact. Looking closer at product and regional level, we can see that we have a very broad-based organic gross profit development, basically mid-single-digit growth or above for most regions as well as product categories, with APAC being the exception. There is an important story behind that and we’ll come into that on the next page. Let’s look closer at the regional development.

Americas, which represents 63% of our revenue, came in with a 2% organic net sales growth and a gross margin increase of 2 percentage points. The gross margin is supported by messaging and email. This translates into a positive organic GP development in APIs and applications. Looking at the product category level, moreover, we have positive development in networks due to price adjustments, supporting the continued turnaround of networks and providing a positive development of the GP margin. Moving over to EMEA, we had a 3% organic revenue growth. Also here we had a positive gross margin development and we have solid growth in the core messaging business. At the same time, we have reduced the share of fixed fee contracts and this reduction has both contributed to the improved margins and improved cash flow.

What is very positive here also is the strong growth of RCS, which is the next generation of SMS, if you will, providing much more interactive features for a richer experience for users. As you know, we are very bullish on RCS as the next S curve of messaging growth and we see RCS growing more than two times from last year. Overall for the group, we had actually a 27% quarter-on-quarter growth of RCS traffic. Good momentum, but it’s important to say that it still will take some time before RCS will provide a material contribution to our P&L, but so far so good. Lastly, APAC, here we also have an organic net sales growth of 2% and organic gross profit growth of 3%, which also translates into a margin increase.

APAC is still on a solid trajectory even if the organic growth numbers look muted this quarter, and it’s mainly because APAC is up against very tough comparables in this specific quarter. What is encouraging in APAC is actually that we see stability in India and hence we are confident that also APAC is on a solid trajectory for the future. Looking closer at the margin development, both gross margin and EBITDA margins are up in the quarter. We see gross margin up 1.2 percentage points compared to the same quarter last year and about half of this is from improved mix and the other half from increased profitability on product level. Looking at adjusted EBITDA margin, we’re up 0.8 percentage point to 13.1% and also non-adjusted EBITDA is up 0.5 percentage point to 11.5%, looking a little bit closer at cost.

Operational expenditure is up 5% on an adjusted basis. This in combination with the gross profit growth of 6% then translates into an adjusted EBITDA growth of 8%, and we continue to be disciplined on cost at the same time as we continue to extract synergies from being one single. If you look at the organic increase of OpEx of 5%, it’s largely about personnel cost, and we continue to remain vigilant if there would be a weaker market development to make sure that we protect our profitability. Now as we report adjusted numbers, I’d like to put some attention to the adjustments, and the message here is the main adjustment items in the quarter are integration cost and the second is FX, and the FX effect here is losses on operational assets, predominantly working capital.

Important to note here in the quarter is that restructuring costs are marginal, and if we compare to last year, we conclude that we have an increase in the quality of earnings despite higher adjustments, and the foundation for this claim is basically that the integration and restructuring cost is $42 million lower than last year. What’s up in this quarter compared to last year is the FX effect on operational assets. Last year we had a positive gain from that, and this year it’s a negative gain. If we believe that FX will normalize over time, this is basically a wash over time. Enough on adjustments. Let’s look at cash flow. Cash conversion in the quarter was strong with a cash conversion of 60% measured as free cash flow to adjusted EBITDA on an LTM basis. Also, solid touched the lower end of our guidance range.

We guide for 40% to 50% cash conversion over time, and we were at 39%. We continue to have some variability in our cash flow, and this is mainly driven by fluctuations in working capital. This is also the driver behind the high cash conversion in Q2, swinging back a bit from Q1. Still, we have slightly higher working capital than normal, and we can actually look at the next page on that. What you see here is net working capital, the solid line here within normal variations. In fact, we have a negative working capital, and that’s what you should expect from us. On a sequential basis, you note here that we’re slightly higher than what we’ve been the last few quarters, and this is because of this temporary supplier agreement that we talked about in the first quarter that we expect to normalize within the year.

The thing I just want everyone to be reminded about when it comes to cash flow is we took a provision in Q4 of SEK 700 million for tax charges, and we expect some of that to be paid at the end of this year and then the full SEK 700 million at some point to be paid next year. That will have an impact on cash flow. Rounding off, very positive development of the balance sheet, we continue to strengthen our financial position. We improved our leverage ratio with another notch during the quarter and landed net debt to adjusted EBITDA at 1.3. This is an improvement driven by a combination of the cash flow but also translation of debt in foreign currency, as we have some EUR and USD debt, and this is now depreciated against SEK. This is the positive effect of currency in the quarter.

Given the solid financial position and solid trajectory of cash flow, the Board of Directors has resolved to activate the share buyback mandate given by the AGM in May, and that we pressed the list yesterday. With that, I’m handing over to Laurinda to summarize the quarter.

Laurinda Pang, CEO, Sinch AB: Thank you very much. Jonas, before we take questions, let me summarize the quarter. Sinch delivered continued growth and stable margins in the second quarter. This is the fourth consecutive quarter of year over year organic net sales, and we delivered organic gross profit growth in all regions and product categories. We improved gross margin and adjusted EBITDA margins, with adjusted EBITDA increasing 8% organically year over year. These figures highlight our focused execution.

Jonas Dahlberg, CFO, Sinch AB: The positive impact of our efficiency measures.

Laurinda Pang, CEO, Sinch AB: Our financial position continues to strengthen, and we remain committed to disciplined capital allocation.

Jonas Dahlberg, CFO, Sinch AB: We have now activated our share buyback program.

Laurinda Pang, CEO, Sinch AB: While we are pleased with our progress, we maintain a prudent outlook for the remainder of the year. Given the prevailing market conditions, we are making meaningful progress on our transformation agenda, solidifying our leadership position and accelerating our momentum in AI. These AI efforts are not isolated initiatives. They are embedded in our core strategic priorities and directly support our value creation agenda. We remain focused on executing our plans and winning in the areas we have a right to win: enterprise expansion, self-serve, RCS, Email, and partners in ecosystems. As you’ve heard throughout today’s presentation, we’re making consistent progress against each of these strategic priorities, translating our efforts into tangible market advantages and customer successes.

Our Q2 execution was another important building block towards our midterm guidance of 7% to 9% organic growth in net sales and gross profit by the end of 2027, a journey we continue to approach with steadfast focus and realistic expectations. Thank you very much for joining us today. Let’s now open the call for questions, please.

Conference Operator: If you wish to ask a question, please dial on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial 6 on your telephone keypad. Next question comes from Erik Rojestal from SEB. Please go ahead.

Good morning and good afternoon. Two questions for me if I may. I might come back to the third one later, but I want to dig a bit deeper on the discrepancy here between organic net sales growth and gross profit growth in the quarter. It looks like sort of the main difference is in API platform in APAC and Americas. Is there anything to call out here on the operator side of the equation that is driving this gross margin improvement? Or is it maybe a mix effect, and is it fair to say that organic gross profit growth is likely to be a bit lower if organic net sales growth improve? I’ll start with that and then come back. Thanks.

Laurinda Pang, CEO, Sinch AB: Thanks Eric.

Jonas Dahlberg, CFO, Sinch AB: I think first of all, the difference in GP and organic growth is really the effect of product mix as.

Laurinda Pang, CEO, Sinch AB: As customer mix.

Jonas Dahlberg, CFO, Sinch AB: Both Email that we called out had a fantastic quarter. Our Voice interconnect business also had higher gross margins and has been growing faster in the quarter.

Laurinda Pang, CEO, Sinch AB: Both of those and Email of course has higher gross margins.

Jonas Dahlberg, CFO, Sinch AB: Both of those had a positive.

Laurinda Pang, CEO, Sinch AB: Impact on gross profit.

Jonas Dahlberg, CFO, Sinch AB: We also had a change in business mix in API, so we had less lower margin SMS business, which again has.

Laurinda Pang, CEO, Sinch AB: A positive impact on gross profit.

Jonas Dahlberg, CFO, Sinch AB: terms of moving forward, you heard my comments on the lower net sales piece being something that we have to get better at.

Laurinda Pang, CEO, Sinch AB: Right.

Jonas Dahlberg, CFO, Sinch AB: At just 2% organic growth, it’s not where we want to be ultimately. That is what ultimately will drive.

Laurinda Pang, CEO, Sinch AB: Sustainable gross profit growth going forward.

All right, that’s fair enough. I wanted to follow up on the OpEx growth as well. The organic OpEx, adjusted OpEx growth accelerated quite sharply compared to Q1, and the average number of employees I think was up 5% year over year. Is there anything to call out here, or is this just an effect of the growth investments you have taken in recent months? Should we continue to see similar organic OpEx growth ahead? Thank you.

Sure.

Jonas Dahlberg, CFO, Sinch AB: I’ll start and then ask Jonas to.

Laurinda Pang, CEO, Sinch AB: Help out here as well.

Jonas Dahlberg, CFO, Sinch AB: I think as far as OpEx growth is concerned, we did signal last year.

Laurinda Pang, CEO, Sinch AB: That we would continue to make investments in the strategic areas that we needed.

Jonas Dahlberg, CFO, Sinch AB: We effectively self funded that.

Laurinda Pang, CEO, Sinch AB: For the most part, we do have.

Jonas Dahlberg, CFO, Sinch AB: Inflation and merit increases to make sure that we’re keeping our employees up against market in a competitive way. You should see that basically the.

Laurinda Pang, CEO, Sinch AB: EBITDA margins going forward will be similar.

Jonas Dahlberg, CFO, Sinch AB: To that of the first half, we do expect that gross profit.

Laurinda Pang, CEO, Sinch AB: Will grow as well.

Jonas Dahlberg, CFO, Sinch AB: Jonas, do you have anything more?

Laurinda Pang, CEO, Sinch AB: To add to that?

Jonas Dahlberg, CFO, Sinch AB: Not really.

I think that’s a fair description.

Laurinda Pang, CEO, Sinch AB: Thank you.

All right, great. Just a final, final question if I may on the AI. It’s a really interesting topic. Of course, you highlighted this as a sort of structural catalyst for the sector. I mean, is it fair to say that this is already a factor that is showing up in your growth today, or is it more of an accelerator in the years to come? Thanks.

Yeah, Erik, to your point, I think yes, it is structural.

Jonas Dahlberg, CFO, Sinch AB: It will fundamentally change the way that both humans as well as agents communicate. Ultimately, we’re of the belief that all of these agents that are starting to grow across.

Laurinda Pang, CEO, Sinch AB: All business and industry, they have a.

Jonas Dahlberg, CFO, Sinch AB: Need to get to an end consumer at some point, they need to communicate.

Laurinda Pang, CEO, Sinch AB: With something on the other side across.

Jonas Dahlberg, CFO, Sinch AB: All channels, whether that be messaging, voice, email, video, etc. Sinch is well poised to play very well in that.

Laurinda Pang, CEO, Sinch AB: Right.

Jonas Dahlberg, CFO, Sinch AB: We have the underlying infrastructure, and we.

Laurinda Pang, CEO, Sinch AB: Have all of those channels of communications.

Jonas Dahlberg, CFO, Sinch AB: It is something that again we’re.

Laurinda Pang, CEO, Sinch AB: Embedding within our product portfolio.

Jonas Dahlberg, CFO, Sinch AB: We’re seeing a little bit of that at this point, but we do think that there’s opportunity in the future.

Okay, thank you.

Conference Operator: Next question comes from Predrag Savinovic from Carnegie. Please go ahead.

Hi Laurinda. Hi Jonas. Thanks for taking my questions. Also want to ask a little bit on growth to try to understand the trend better. It’s quite a good improvement from last quarter. It looks like it’s broad based. I mean I note the comments you have on net sales, but then again you call out positive mix shifts, Email, specifically RCS as well, which are on a higher margin level. I’m thinking how consistent can this mix be for the remaining two quarters of the year, and if that is so, can the gross profit growth potentially continue on a similar level towards the end of the year? Even if the net sales would lag, then I understand over time these should converge, but for the near term or the next 12 months even.

Laurinda Pang, CEO, Sinch AB: Hi Bridger, thanks for the question.

Jonas Dahlberg, CFO, Sinch AB: I think maybe a way to think about it is, first of all, you.

Laurinda Pang, CEO, Sinch AB: Mentioned RCS as being a driver for growth.

Jonas Dahlberg, CFO, Sinch AB: It’s actually not. We are seeing good progress in RCS, we’re seeing great volume increases in RCS, but it’s actually not impacting the financials just yet. The reason being is at this point it’s effectively substituting SMS. We’re not seeing an uplift there yet, but we do have an expectation and ambition for that in the future and over time. To your point, you called out Email. You know we did have, you know.

Laurinda Pang, CEO, Sinch AB: Different parts of the business that did grow. We saw good, strong partnership growth, we saw self-serve growth.

Jonas Dahlberg, CFO, Sinch AB: If you heard I mentioned that.

Laurinda Pang, CEO, Sinch AB: Enterprise growth in terms of the number.

Jonas Dahlberg, CFO, Sinch AB: Of enterprise customers is stable from Q1.

Laurinda Pang, CEO, Sinch AB: We’ve seen good leading indicators there.

Jonas Dahlberg, CFO, Sinch AB: We have one new business.

Laurinda Pang, CEO, Sinch AB: Really nice logos, to be quite honest.

Jonas Dahlberg, CFO, Sinch AB: It does take time for that revenue to actually ramp the way.

Laurinda Pang, CEO, Sinch AB: That I would characterize.

Jonas Dahlberg, CFO, Sinch AB: If you are thinking about second half, I think it would be safe to say that if you look at first half in the aggregate, that’s probably a good way to think about second half.

Laurinda Pang, CEO, Sinch AB: I would not extrapolate gross profit growth.

Jonas Dahlberg, CFO, Sinch AB: In Q2 as the new baseline, I think it comes in fits and starts. It’s a good steady movement up. I would rather us think about it.

Laurinda Pang, CEO, Sinch AB: The average of the first half.

Okay, no, that’s very clear. A follow up to that. You have spoken a bit about macro and some cautiousness in your CEO remarks and so on, but are you seeing anything specifically that suggests challenges ahead in the volumes right now, or is this more you anticipating this could happen? Remember, something could happen in H2 that could affect us.

Jonas Dahlberg, CFO, Sinch AB: We’re not necessarily seeing too much at this point. We’ve seen geopolitical changes, wars over the years, we’ve seen pandemics over the years. What we know to be true is that it does have an impact traditionally on marketing use cases. Enterprises tend to be cautious in their spending, so they may slow down or.

Laurinda Pang, CEO, Sinch AB: They will look for cost efficiencies.

Jonas Dahlberg, CFO, Sinch AB: Look for concessions in terms of what they already purchase. We haven’t seen a lot of that just yet.

Laurinda Pang, CEO, Sinch AB: We are being cautious, and we are.

Jonas Dahlberg, CFO, Sinch AB: Being pragmatic because, as you know, this.

Laurinda Pang, CEO, Sinch AB: It is a very volatile environment, and it’s very difficult to predict.

Jonas Dahlberg, CFO, Sinch AB: Our message is that, you know.

Laurinda Pang, CEO, Sinch AB: We’re watching it carefully, we will continue.

Jonas Dahlberg, CFO, Sinch AB: To be prudent with regards to our expenses, so that we can protect our profitability.

Okay, brilliant.

Finally, to Jonas, you have been guiding previously around the 40 to 50% conversion to free cash flow from EBITDA. You said it today also. If you could elaborate maybe on what kind of levers you could pull in the future, can this level improve and if so, how and why.

Laurinda Pang, CEO, Sinch AB: As.

Jonas Dahlberg, CFO, Sinch AB: The business looks today, you know.

Current level of adjustment items, current tax.

Rate.

This is roughly where we will land. 40% to 50% it could go, you know, theoretically, if all stars are aligned, north of 50% to maybe 55% or so with the definition we have of cash conversion. What I feel confident about is the 40% to 50% level. Over time there will continue to be.

Swings in working capital.

We will try to smoothen that and to be better at working capital management. Over time, it’s the 40 to 50%.

Again.

What I want to remind you about is the $700 million tax provision we’ve taken, and that’s the cash that has to leave the company. On the other hand, we have a positive going in the other direction, not with the same amount, but still a meaningful contribution from this supplier agreement we talked about in Q1. It’s around half of that amount. So $79 million out, $350 million in somewhere over the next few quarters.

Okay, super. Thank you so much.

Conference Operator: Next question comes from Ramil Koria from Danske. Please go ahead.

Hey guys, thank you for taking my questions. Just trying to reconcile things a little bit. If the margin, operating margin is supposed to be flat in H2 versus H1 and one is to extrapolate H1 organic gross profit growth, that would imply a fairly, not going to say material, but an acceleration in the OpEx organic growth. Could you talk a little bit about, you know, could you break that down a little bit? Why is organic OpEx growth going to accelerate into H2 versus Q2? I don’t think.

Yeah, go ahead.

Laurinda Pang, CEO, Sinch AB: I was going to say.

Jonas Dahlberg, CFO, Sinch AB: Hey, Ramil, thanks for the question. First of all, we take merit increases in the third quarter. That would have an impact on OpEx. Anything else, Jonas?

I was just about to say that on a sequential basis you will see an increase due to merit, basically inflationary effect on personnel cost. You shouldn’t anticipate an acceleration of OpEx. You shouldn’t do that. We should be able to defend our margins, our adjusted EBITDA margins with a div.

Okay, makes sense. On the topic of AI, just curious to hear a little bit about the monetization opportunities you have in the space, so to say. I can see why the conversational solution would drive sort of volumes, and that’s one way of monetizing. I was also thinking about the MCP. Is that going to be a part of, like, an embedded part of the infrastructure that you provide moving forward? More of a sort of a differentiator, or is that something you can monetize, isolated, perhaps towards app clients?

I think the way we should all probably think about MCP is that it’s the standard, right? It’s the USB for AI effectively. I don’t necessarily think it’s a differentiator. I do think it’s a requirement in order to play in this space. Your thoughts about how to monetize the, you know, because we have the infrastructure. I think that’s right. Volumes will increase because the amount of communication flow will increase, and a lot will be coming through machines as well.

Laurinda Pang, CEO, Sinch AB: As in a hybrid way, right across between both humans and machines.

Jonas Dahlberg, CFO, Sinch AB: As I mentioned earlier, they need to transmit and get to an end user in some way through some channel of communication. We’re well positioned given the large infrastructure, but also the different channels that we support.

Can I ask a follow up to that, Laurinda? I mean, clearly you having a lot of interactions to build your data set on vis-à-vis smaller players and MCP becoming somewhat of a hygiene factor in the future. How do you think the competitive environment will change in the near to midterm considering all the technological improvements we are seeing with incumbent players here?

I think it’s AI in general. This is not about, I’m saying, but AI in general is going to change and increase the amount of communications that’s happening. Agents are going to be asked to achieve objectives. They’re not going to be dictated and told the way in which they need.

Laurinda Pang, CEO, Sinch AB: To facilitate actions or workflows.

Jonas Dahlberg, CFO, Sinch AB: Agents ultimately will choose. What is going to be important for us is to be able to make sure that our capabilities, our services, and our infrastructure are easily discoverable and can easily be consumed by these AI agents. That’s also true for developers because, you know, everybody is going to have to get more efficient and be more precise in terms of the actions that they’re taking.

Laurinda Pang, CEO, Sinch AB: I think for Sinch, it really.

Jonas Dahlberg, CFO, Sinch AB: Means that the infrastructure that we have and the core of our business is so fundamental to this new world that AI presents. We have to ensure that we are.

Laurinda Pang, CEO, Sinch AB: Being excellent in delivery of the core.

Jonas Dahlberg, CFO, Sinch AB: In order for us to play a role in this new future world of AI, that’s what we’re focused in on, to ensure that the core delivers seamlessly and that we, through the likes of MCP technology, allow AI agents as well to be able to find us and to use us.

Interesting. Okay, thank you guys. Just a final, if I may squeeze it in. I know I’m directing the question to the wrong sort of audience, if you will, but just trying to understand for modeling purposes, how should one think of like buyback magnitude? Any indications on that would be super helpful.

Jonas.

Yeah, I mean the demand that we got from the AGM, and this is aligned with the resolution of the board, is that we can buy up to 10% of outstanding stock. The board will from time to time evaluate what they think is in the best interest of the shareholders and also given our financial position. Basically, you’ll see that’s the message. The board will do what they think.

Is in the interest of the shareholders.

Okay, thank you so much both.

Conference Operator: Next question comes from Laura Mettier from Morgan Stanley. Please go ahead.

Hi, thanks for taking the questions. Two questions for me please. First one, you said that profitability has improved at product level. Do you mind just going into what products you saw like better profitability and put this in the context of I remember you talking about competitive pressures that you were seeing in the US for the messaging segment. How is that evolving and are you seeing any kind of improvement there? Secondly, if you could give us an update on the integration of the different business units and impact you were seeing on cross selling. Thank you.

Laurinda Pang, CEO, Sinch AB: Sure. Jonas, do you want to start with that?

Jonas Dahlberg, CFO, Sinch AB: The profitability question, and then I’ll take the cross sell.

Yeah.

We have an improvement of the profitability in the traditional messaging business because we’re increasing sort of the high value part of that business and reducing some of the commodity business. Another one is the profitability improvements we have on the network side because.

Of price adjustments in the US.

It’s really broad based across the portfolio, the margin improvement. It’s a combination of commercial discipline.

And.

Better operational execution, also providing the gross margin improvement.

Laura, on the integration of the other businesses or the businesses as it relates to cross sell, we are seeing quite a bit of cross sell take place. I mentioned last quarter those two large email customers that we highlighted. Those were originally SMS customers that we’re now selling.

Laurinda Pang, CEO, Sinch AB: Very large volumes of Email, too.

Jonas Dahlberg, CFO, Sinch AB: You know we’re seeing enterprise customers on the messaging side starting to buy some.

Laurinda Pang, CEO, Sinch AB: Some more traditional Voice services.

Jonas Dahlberg, CFO, Sinch AB: We’re seeing Email customers starting to purchase messaging. It’s more anecdotal at this point. I haven’t given you hard KPIs on it, but as we look at the pipeline and also in the customer wins that happen in Q4 and Q1, predominantly those were for the most part large cross selling opportunities.

Thank you.

Conference Operator: Next question comes from Fredrik Lythell from Handelsbanken. Please go ahead.

Thank you very much. Thank you for taking my questions as well. Congratulations to nice report. I have one maybe a little bit longer term question, Laurinda. If you are trailing at a certain % adjusted EBITDA margin, which is sort of your 2027 mid target really, and you’re struggling a little bit with your top line growth ambition, would you see it as a tool in your toolbox to increase your OpEx on sales and marketing in order to drive it? Maybe take some of your adjusted EBITDA margin for that purpose would be an interesting question. Also, on the 10DLC situation, what does that actually mean for you going forward? Have you sort of taken out some of the questions?

Jonas Dahlberg, CFO, Sinch AB: Appreciate.

Laurinda Pang, CEO, Sinch AB: Sorry, I don’t know if that’s me or if that’s Frederick.

Jonas Dahlberg, CFO, Sinch AB: Could you hear?

It’s Fredrik’s line.

All right, I don’t know.

Laurinda Pang, CEO, Sinch AB: If we’ve lost him for the.

Jonas Dahlberg, CFO, Sinch AB: the purposes of the rest of the audience, I’ll try and answer that.

Laurinda Pang, CEO, Sinch AB: least the first question. I heard, second, something about 10DLC.

Jonas Dahlberg, CFO, Sinch AB: I don’t know the context of it.

Laurinda Pang, CEO, Sinch AB: As far as top line growth.

Jonas Dahlberg, CFO, Sinch AB: As concerned, you know, you rightfully call out the fact that we’re not pleased with how we’re performing yet there. We do have an expectation that that continues to grow. Clearly, we have an ambition to get there such that we can deliver 7 to 9% sustainable year over year growth.

Laurinda Pang, CEO, Sinch AB: By the end of 2027.

Jonas Dahlberg, CFO, Sinch AB: We have a little bit of.

Laurinda Pang, CEO, Sinch AB: A hill to climb there. Excuse me.

Jonas Dahlberg, CFO, Sinch AB: Between now and the end of 2027, protecting our EBITDA margin is a very important priority.

Laurinda Pang, CEO, Sinch AB: Large priority for us.

Jonas Dahlberg, CFO, Sinch AB: We have said very clearly in order to deliver value, we need to have sustainable but also profitable growth. We’re comfortable in that 12 to 14% range that we’ve regulated, and we will make sure that we manage within that range in terms of being able to put more, more.

Laurinda Pang, CEO, Sinch AB: Funds towards revenue growth.

Jonas Dahlberg, CFO, Sinch AB: We will see. We will make investments where we think is necessary and where we think we will get strategic opportunities in front of.

Laurinda Pang, CEO, Sinch AB: Us and where we think we’ll get the appropriate returns.

Jonas Dahlberg, CFO, Sinch AB: We are very conscious of the fact and committed to maintaining profitability.

Laurinda Pang, CEO, Sinch AB: I don’t know, Frederick, if you’re back.

Yeah, I’m back. You said I lost you for a second there in the beginning.

Yeah, you said something with regards to.

Jonas Dahlberg, CFO, Sinch AB: 10DLC, but we didn’t hear your question.

The 10DLC, the situation there is that something that will lead to that you are taking over traffic from other competitors or what will that sort of drive? What will happen from your unique positioning there?

Yeah, it’s our competitors.

Laurinda Pang, CEO, Sinch AB: Have some of the connections.

Jonas Dahlberg, CFO, Sinch AB: We are just the only one.

Laurinda Pang, CEO, Sinch AB: Has all of the connections both ways in terms of mobile origination and mobile termination across all of the US carriers.

Jonas Dahlberg, CFO, Sinch AB: There is competition in certain areas and not in others. What that means is that in those certain unique circumstances, other competitors will have to go via Sinch in order to connect to a particular carrier. At this point, I wouldn’t say it’s going to materially change the environment. This is a large, complex ecosystem, and we all kind of depend on each other in certain circumstances. We feel like at this point.

Laurinda Pang, CEO, Sinch AB: For customers to come directly to Sinch in these cases, it will improve.

Jonas Dahlberg, CFO, Sinch AB: Their quality, quality of service, their reliability. They could go through other carriers if they wanted to, or other aggregators. They would ultimately need to ride across Sinch’s infrastructure in certain circumstances.

Okay, fair enough. Can I just have a follow-up on the discussion and your comments in the report? About 500 large enterprise customers, that group of customers, and it was flat in Q2 for the quarter, but you expect that sort of. You have on borderline. You will start to see traffic from a few new accounts. Is that positive for your sort of gross margin, or will it be a burden in the initial phases on your gross margin?

No, I don’t see it being a burden on. In the initial phases, these are large enterprise customers sold at good margin, and as they onboard, it will just be incremental to gross profit. We’re maintaining our discipline in terms of winning business.

Okay, very clear answer. Thank you for all the answers.

Laurinda Pang, CEO, Sinch AB: Thank you very much, Fredrik.

Conference Operator: Next question comes from Thomas Nilsson from Nordea. Please go ahead.

Thank you for taking my question.

Can you elaborate on your M&A pipeline?

Whether valuations in the market have now adjusted enough to reactivate bolt-on acquisitions opportunities?

Laurinda Pang, CEO, Sinch AB: Hi, Thomas, thank you for the question.

Jonas Dahlberg, CFO, Sinch AB: Listen, I would reiterate what I’ve said in the past, which is the fact that, yes, we see M&A as a part of our strategy long term, but at this point in time, we continue to be focused in on the business inside of Sinch.

Laurinda Pang, CEO, Sinch AB: Through all of the acquisitions and the.

Jonas Dahlberg, CFO, Sinch AB: Integrations that we have going on. That being said, we do continue to evaluate the market. Jonas, do you want to add anything more to that?

No, I think that’s fair.

And.

Maybe the most attractive M&A opportunity now is the Sinch share. That’s the capital allocation that the board has decided on short term, but longer term, in particular when it comes to AI, it may be important to add strategic capabilities to develop our offering. In addition, this is an industry that will continue to consolidate, so medium to long term, it’s definitely on the radar. With M&A, and this is important, it’s not just adding to shopping cart opportunities; opportunities come when they come. Timing is always uncertain.

Okay, thank you. Thank you very much.

One final question, if I may. Are the specific verticals driving more of your growth, such as tech, finance, retail?

How do you see this developing?

Going forward with growth from specific verticals?

Yeah, as you know, the vast majority of our business does come through those verticals that you just mentioned, tech, finance.

Laurinda Pang, CEO, Sinch AB: Retail or e-commerce.

Jonas Dahlberg, CFO, Sinch AB: I think we’re starting to see some.

Laurinda Pang, CEO, Sinch AB: Good movement in health care as well. In general, I would say those three.

Jonas Dahlberg, CFO, Sinch AB: Okay.

Thank you very much.

Laurinda Pang, CEO, Sinch AB: Thank you, Thomas.

Conference Operator: There are no more questions at this time. Thank you, everyone, for attending the Sinch Q2 report for 2025. Have a nice day.

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