Thank you for standing by. Welcome to the Sinch Q1 Report 2022 conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session, and to ask a question during the session, you will need to press star one on your telephone. Please be advised that today's conference is being recorded. If you require any assistance during the conference, please press star zero. I would now like to hand the conference over to our speaker today, Thomas Heath. Please go ahead. Thank you, operator. There is an awful amount of noise. I'm not sure who you got connected to the call. There could be a lot of background noise. Perhaps a training call. Operator? Yes, I'm just going through to locate the noise now. If you'd like to pinch the nose for me. Operators? I can hold. Standby. Thank you. Thank you. All right. That's better. I think that was better. Thank you very much, operator. We'll kick off. My name is Thomas Heath. I'm Chief Strategy Officer and Head of Investor Relations at Sinch AB. Together with me today, our CEO, Oscar Werner, our CFO, Roshan Saldanha, and our Investor Relations Director, Ola Elmeland. We'll run through a presentation and then take questions from analysts. Please limit yourselves to two questions at the maximum, and we'll loop you back to the end of the queue. With those first introductory remarks and a warm welcome to everyone on the call, I'll hand the word over to our CEO, Oscar. Thank you, Thomas. Great to speak to you all, and thank you for your interest. Welcome to this Q1 presentation from Sinch. Operator, can we go to slide two, please? We had SEK 19.4 billion net sales in the past 12 months, Adjusted EBITDA of SEK 1.8 billion, 4,000 people round about, truly now in this quarter's being positioned as one of the absolute top global leaders in the cloud communications and mobile customer engagements. I think that's a very strong position in a very large market, and we're extremely happy to have gotten there. We have over 150,000 paying customers. We have a scalable cloud communication platform for messaging, email, and voice and video. We do more than 600 billion engagements per year, and we serve successfully eight out of 10 of the largest US tech companies. Fascinating thing with this market, 100% consumer penetration. There is no person on the planet that you can meet of the adult population that I know of that is not in any way, shape, or form a user of these services. Of course, there are, but it's a very small percentage point. This is a growing multi-billion-dollar US market. It's probably a $40 billion-$60 billion market today, and we're a true leader. We are the most profitable company in our space, important to remember. Being profitable since our foundation and truly lead by the profitability in this market. Operator, slide three, please. Starting with financial targets, the Adjusted EBITDA per share rolling 12 months. The financial target to grow about 20% per year, measured on a rolling 12-month basis, and our strategies to combine organic and acquired growth. Obviously, this metric is affected by timing of share issues and consolidation of acquired Adjusted EBITDA. That's why we had a little bit of a lower growth in last quarter. That's, as you see, kicked back up now. A 36% growth in Q1 follows the closing of the major transaction in late 2021. This is what we were targeting, obviously, with a lot of these transactions. Very happy to report that as the financial target. Operator, slide four, please. First quarter highlights. The first one is the positioning. I mean, significantly increased scope in sales. Net sales growing 96%. Gross profit 156%, and Adjusted EBITDA 182%, including acquisitions. Have really diversified our earnings base with an Adjusted EBITDA of SEK 760 million in the quarter alone. This is by far the most profitable company in this space. Truly best-of-breed product for mobile messaging, voice calling, and email. We're serving both enterprise customers, developer, and SMBs in one company, and that's why I think it's a very powerful offering. The last twelve months performance net sales of SEK 24.5 billion and then a gross profit of SEK 8 billion. That's, you know, a very strong position we've taken. We got higher margins following acquisitions. Gross margin at 32% in Q1 versus 26% in Q4. Adjusted EBITDA margin at 12% versus 9% in Q4. Coming to organic growth, revenue, 22%, 17% organic. Organic gross profit, this is primarily the Sinch messaging business, of 2% and 5% performed organically. The organic gross profit is obviously not something we're happy with, but not something we think, not how we should live in this market, but that's where it ended up in this quarter. Focus areas for 2022, obviously increased gross profit growth, really honing in on driving the organic gross profit growth, primarily in the messaging segment. Ensuring costs grow in line with gross profit in the messaging and group functions over time. This is what we talked about before. We're in a situation where we're growing extremely fast, and have been taking OpEx to grow at that level, and then it tailed off in two quarters here. Obviously then OpEx are set a little bit earlier, so therefore the OpEx growth takes a little bit of time before you tail it off. We're now putting programs in place for that. Beginning of Q1 we did in order to tail off OpEx growth to match the gross profit growth over time there. Got a new operating model with full P&L responsibility for the business units presidents, so we're happy about that. Really interesting opportunities for cross sales on messaging, voice, and email products. All right, operator, slide five, please. Gross profit evolution, as you see here, organic gross profit being 2%. We talked about that last quarter, the minimum commitment to this mobile, the global mobile operator, causing a 2% negative impact of GP in Q1, so it would have been 4% without that. The rest of this is still an ability to partially pass on carrier price increases in Brazil and India, and price adjustments to significant, to large customers, causing lower margins or lower organic growth in this quarter. This is something we will work really hard on going forward. If you ask us, we would say that the trading environment, we think it's similar to Q4 2021. We see no major difference in the trading environment. A little bit when you look at the actual numbers, a little bit lower in this quarter, but we think the trading environment is relatively similar. We also believe this is a strong market. We have seen these things before, a couple of quarters of slower growth. After a while, we work through these things, and we get back to the growth levels. That's our, you know, strong focus to try to do going forward, of course, as well. Including acquisitions, very obviously very strong growth, both Inteliquent, MessageMedia, and Pathwire, and driving a lot of growth in this quarter. All right, slide six, please, operator. Adjusted OpEx. We had slower OpEx growth in 2020 due to the COVID-19 outbreak, so we held OpEx there. We increased the OpEx base during 2021 to do sales and product initiatives and the large portion to prepare for upcoming large acquisitions, which happened then closed in Q4, to set up the company, all the processes in order to make sure we can handle that. Of course, businesses acquired during 2022, adding further OpEx. In Q1, we had a 7% OpEx increase in Sinch and Wavy from Q4 to Q1. Most of this is currency movements. A lot of these costs are U.S. and Brazil. Therefore, compared to the SEK, it obviously with the current exchange rate climate, it drives an OpEx growth from outside. We are also, like we said, I mean, we were, you know, in Q3, we were hiring, and those people coming in in Q1, and that's now tailing off since we put in OpEx control programs and slowed down hiring in the messaging segment and in the group functions significantly in Q1. In other areas, we are then growing as per OpEx growth, so as per gross profit growth. Good. Operator, slide seven, please. This is the net sales and profit development in our messaging segments. So as you see, we had 25% transaction growth, 23% organic net sales growth, and then we had a -1% organic gross profit growth in this area. We can really see, I mean, strong underlying demand from the customers, but costs and price at the same time making the gross profit tail off in this quarter and in last quarter. Like I said, we've seen this before. We're gonna work through it. It's not a demand problem, but obviously that is something we need to solve going forward. Message Media contributes, offsets the organic gross margin decline. Happy to say that we had 8,600 new Message Media customers in Q1 and 29% revenue growth and 24% GP growth in Message Media compared to Q1 2021. Operator, slide 8, please. Voice and video, Inteliquent, contributes most of the voice and video business, obviously. Inteliquent, as you know, including the 8YY reform, they had 1% revenue growth in local currencies and also a -1% gross profit growth compared to Q1 2021. The 8YY reform alone is a 9% impact on the gross profit growth from the price regulations on the US toll-free calling. Like we said before, we knew this when we acquired the company. We knew it would be slower reported growth in the first quarter due to this tail off of 8YY. As that tails off, obviously, you know, that will tail off in the coming quarters. Very solid, strong business with high profitability and high cash flow, as you can see. We're very happy with this business and our position we take in the market, and the stability and diversification it gives to our total group. We have an Inteliquent deployed sites in Europe with three, so in France, Germany, and the U.K., and starting to, you know, acquire customers there. We're happy to report that we have three new customers in Q1 on these new sites. Really seeing Inteliquent going outside the U.S. market where they are a leader. This is, in the long run, one of the growth initiatives we have put in place in Inteliquent. If you remember from the acquisition, we saw this company extremely strong, leader in the U.S. market. We knew growth were lower, but we also know if we combine it with a set of growth initiatives going international, increasing the sales force, since they only had 8% of their sales marketing OpEx and sales previously, and then also focusing more on the enterprise segments with programmable voice, our plan is to drive up growth in this business. The first one here, going international, is one of the growth drivers, and we're happy to report the first customers. High profitability, Adjusted EBITDA of 24% of revenue and organic GP growth of 84%. That must be a typo, right? Yeah, sorry. All right. Now I understand. This is the Sinch messaging business. If we don't talk about the Inteliquent side, Sinch had also the Sinch voice business. Sinch organic voice business had an organic GP growth of 84% and returned to positive EBITDA in this quarter. Super happy to see the strong development in that business, which is now folded into the total voice and video numbers. You don't see it separately. Okay, operator, go to slide 9, please. Email segment created upon closing on the Pathwire acquisition had a 27% revenue growth in local currencies and 18% gross profit growth in Pathwire compared to Q1 2021. The gross profit is affected by investment in scalability. Two things, hiring of support personnel, which is counted or hiring of operations personnel, which is counted in COGS in this business. We were low on that in the tail end of 2020, in the tail end here of last year and have hired there in order to better support our customers. That is a step up in costs. Over time, that will keep a lower growth in personnel on the operations side, so that will come back over the coming quarters. Then we have a cloud hosting vendor migration where we right now have double costs because we're moving from one cloud hosting vendor to the other. Eventually, that will result in a cost reduction, but right now, obviously we have double costs since we're running two cloud hosting vendors. High profitability with an Adjusted EBITDA of 37%, so very solid business as well. We see great cross-sale opportunity with the Pathwire business with all our other businesses. Lots of engagement by the sales teams on both sides. We signed two cross-sale contracts in Q1, where enterprise customers in messaging now use Sinch email. We continued cross sales in Q2, including one of the top 10 global technology companies. Now the contract as such with this global vendor or global tech company is a good size contract, but not very large. I think the interesting point is we really see even when we go to the largest customers, there is a lot of interest in the Pathwire product, and it's being very well received from the mid-size customers, and the small customers all the way up to the largest customers. We shouldn't go overboard with the size of this contract, but I think the power of actually being able to bring Pathwire into large customer bases, I think it's a very powerful and positive signal. All right, operator, go to slide 10, please. In the Sinch classic operator segments, we had 17% organic revenue growth in local currencies and 12% compared to Q1 2021. Strong performance in the messaging interconnect services to mobile operators. Adjusted EBITDA margin stable at 9% compared to 8% previous quarter, despite a SEK 7 million impact from the volume commitments from this carrier. Operator business will be included in messaging segment after the upcoming Sinch reorganization to the business unit structure. To remind you, look at slide 11, the business unit structure. Enterprise and messaging driving a 17% GP growth last year, being a large portion of our business. Voice, 32% of the pro forma gross profit, 7% gross profit growth in 2021. Right now, we have the 8YY a little bit bigger in Q1, so a little bit lower there. Developer enablement, 11% of gross profit, but rapid growth. Applications is currently included in messaging, and then we have the SMB segments round about 11 and growing at, you know, like I say, 28% gross profit growth last year. That said, I will leave it to Roshan to go through the financials. Thank you, Oscar. Good afternoon, good morning to everybody. Roshan Saldanha here, CFO for Sinch. I mean, if you turn to the income statement, which is on page 13, then you essentially see the significantly increased scope and scale of Sinch, with a total net sales of 6.5 billion Swedish kroner growing 96%, gross profit growing 156%, and Adjusted EBITDA growing 183%. It also shows the changed margin profile with a gross margin at 32% in Q1 versus 26% in Q4, and an Adjusted EBITDA margin at 12% in Q1 versus 9% in Q4. Adjusted EBITDA is different from EBITDA, primarily due to acquisition costs, integration costs per share-based incentive programs, and foreign exchange related movements. The total extraordinary items or adjustments for the quarter amounted to SEK 112 million, versus SEK 141 million in the previous quarter, Q4 2021. Of this, integration costs were at SEK 59 million versus SEK 66 million in the previous quarter, more or less being stable through Q3, Q4, and now Q1. Further down in the P&L, you see the depreciation and amortization of SEK 554 million, which is significantly increased due to the non-cash planned amortization of intangible assets created through the acquisitions of Inteliquent, Pathwire, and MessageMedia. 440 million of this 554 million is in total related to these non-cash amortizations. Excluding these non-cash amortizations, adjusted EBIT was at SEK 647 million versus SEK 243 million in the same quarter the previous year. We have net finance income and expenses coming in at SEK 16 million. This includes an interest cost of SEK 53 million, which shows the low interest cost that we have on the borrowings of the company. Income tax at an effective tax rate of 20% compared to the profit before tax. Turning to the next page, please, operator. Here you see the reconciliation of cash flow to Adjusted EBITDA. Adjusted EBITDA is then affected by paid interest, paid taxes, and other items primarily related to foreign currency flows before it ends up in cash flow before changes in working capital. This is the first quarter where we have the full consolidated Adjusted EBITDA and cash flow before changes in working capital from the large acquisitions completed in Q4. Here you see again the increased cash flow before changes in working capital to SEK 566 million, compared to SEK 226 million in the same quarter the previous year, giving a conversion of 74%, which is well in line with our expectations. Moving on to the next page, where you see the cash flow statement. We further take the cash flow before changes in working capital, and we have the changes in working capital, which this quarter came in at a negative SEK 426 million. This is to be equated to a reported minus SEK 24 million in the Q4 of 2021. However, the minus SEK 24 million also included acquisition balances that came in through the closed acquisitions in Q4. Excluding that, there was a positive effect of about SEK 500 million in Q4 2021 for the organic business. The negative change in working capital during this quarter is affected by late payments from a few major customers and also return to normal accounts payable levels, which we will come to on the next page. Further, investments remain at SEK 129 million, which is in line with previous trends of between 2%-3% of revenues. However, slightly increased by the acquisition of Inteliquent, which is higher investments compared to the rest of the group. Also this cash flow statement shows the strong financial profile with diversified earnings pools, giving further stability to the cash flow generation capability of Sinch. Moving on to the next page, operator, which shows a development of day sales outstanding and days payable outstanding. This calculation is performed on a pro forma basis, both when it comes to the balance sheet and including the acquisitions that we have performed previously. Here you will see that, in general, the DSO has over this 15-month period trended slightly downwards. However, when specifically compared to Q1 of 2021, it is increased. As I said before, it's related to a few late payments from specified customers, which the number of days is quite small, but that gives a large impact in value terms. On the DPO side, you also see a very limited change compared to longer trend. However, DPO can be affected by specific payments as well from Sinch. You see essentially in December 2021 that AP levels were slightly higher, whereas now in March 2022 we are back to more normal accounts payable levels. This shows that the underlying terms and conditions with our customers and suppliers remain relatively stable over a longer period of time. Moving on to the next page, where we summarize our financial targets. As we have said before, we have two financial targets. Number one, Adjusted EBITDA per share to grow 20% year-over-year, and the second one being to keep net debt over Adjusted EBITDA below 3.5x again over time. Fueled by the acquisitions closed during Q4 of 2021, Adjusted EBITDA per share grew 36% in Q1 2022, measured on a rolling 12-month basis. This includes the effect of share issues and emissions performed, and also pro forma net debt over EBITDA, excluding the effect of IFRS 16 related leases on both net debt and EBITDA, and Adjusted EBITDA came in at 3.1x versus our target of 3.5x. With that being said, I would like to hand over back to Oscar for concluding remarks. Thank you. Thank you, Roshan. Yeah, this quarter, obviously organic growth, not where we want it to be. We will work very, you know, diligently on that. This quarter, we also positioned the company in an absolutely stellar way in a very attractive market. Very happy to be when you're now at trade shows, now speaking to big customers and they really see, you know, us as one of the absolute top providers. It is almost like they're, "Why would we not do business with you?" I think that's a very, very powerful position to be in. And really being singled out as one of the top leaders in this market is a very powerful position. That's truly the positive news. Now we need to work very hard to get all the financial numbers at the right place. Thank you for listening, and let's open up for questions. Thank you, Oscar. Operator, can we have the first question from the conference line, please? Thank you. Just as a reminder, if you do wish to ask a question, you will need to press star one on your telephone. To withdraw your question, just press the pound or hash key. May I ask that you also limit your question to two per person? Okay, our first question is from Predrag Savinovic, sorry if I've said that wrong, from Carnegie. Thank you very much, operator. No, that sounds about right. Thank you for taking my questions. My first one is a little bit on guidance. I know you don't guide, but your share price has been quite volatile, and you'll probably notice there's some uncertainty also with investors generally. I'm wondering at what point would you consider issuing guidance of some sort, and if not, why wouldn't that be the case? Any kind of indications on the, you know, the cash flow or where the growth is trending into Q2 would be very helpful. I'll start there. Thank you. Roshan, do you wanna take this one? Yeah, I can try to start off. I think just briefly, Predrag, on the guidance piece, of course, I mean, you know, we have not historically provided guidance. I think, you know, analysts like yourself do a fantastic job actually of forecasting change. I think, you know, I think, we're delivering quite much in line with consensus, slightly above, you know, at this time, but broadly over time, you know, very much in line. I think, you know, the challenges, as I think from our perspective, is of course that when we look into the business. I mean, there are a few factors that we see that, you know, that are predictable and, you know, as we said before. I mean, we think that the cost increases that we've seen and the price changes that we've seen towards customers, you know, are things that will play out over time. You know, I think we have fairly reasonable visibility into those. You know, there's always a risk of unknown factors, you know, kind of affecting business development. I think what we've done over the last 12 months essentially through diversifying our product pool is increased stability and increased you know stability in our earnings pool and in our revenue pool. That's you know that continues to be the effort going forward you know to work on that front. On the second conclusion, I mean you know when do we see things turning around? I will let Oscar comment on that as well. I think the first thing is, you know, we do see that there are things that are negative now that you know have a limited shelf period and will play out during the course of this year. You know, that doesn't. You know, I would not go as far as to say that, you know, to make that into a guidance or a prediction because I think, you know, again, as we say, there could be other unknown effects that might show up later in the year. From a cash flow perspective, I think, you know, as we said, working capital, I mean, you know, you see that the underlying DSO, DPO trends are fairly stable. We have, you know, short-term effects of some customers, you know, not paying us in time during Q1. That's something that we continue to work with, but what we see, no credit risk and there's no reason to believe that that shouldn't come back, you know, at a later point in time. Oscar. Yeah, no. On when turnaround, that's hard to know. As you know, we don't give guidance for the above reasons. We have seen this a couple of times before in this market, and we're talking about the messaging segment, right? That's when we talk organic, that we're talking about the messaging segment. We've seen this a couple of times before. You know, it is not a demand problem. It is not a volume, it's not a revenue problem. Customers are still buying. Then a couple of quarters, you get tougher comparison, you know, or not. Sorry, not tougher comparisons. You get tougher price negotiations with big customers and with operators, and then organic growth tail off. Every time we've seen before, it takes a couple of quarters, and then we get back when these changes have weeded out. I cannot say today when, and therefore we won't give a projection. We have good confidence in this market and good confidence in our ability to play in the market, and therefore we have good confidence that we will get back to better organic growth. On the Inteliquent side, you have the 8YY reform, of course. So it depends on if you look at the reporting numbers or the normalized numbers without it. That is something that will tail off during the coming quarters. That's an outside more concrete effect that we know of, and that we knew when we made the acquisition of Inteliquent. Thank you. Next question, please. Am I still on the line? Can I ask another one? I think if. Yep. Well, let's count that as one. You'll get one more. Fantastic. I wanted to ask a question on product and security generally. I think it's quite safe to say that you have true super network compared to your competitors end to end, making by definition a safer and more reliable service than some of your competitors or most of them. I know you're already embedded in some security applications as well. Trying to see if this is something that can give you an edge in the market and win more business as well, because that's also quite an important theme generally speaking, right? Yes, it's a very important theme. Definitely in some areas you can, especially towards smaller players, you can. Then in some regions you can. That's something we work hard on. We think it's a very important feature of this type of product in the market. Definitely that is in many RFPs, we get asked about security, you know, reviews and have audits, et cetera. In many cases, that's something we can win business of. Thank you. Operator, next question, please. Thank you. Your next question comes from Stefan Gauffin from DNB. Yes. I will try to ask Fredrik's question in a different way. On the drag on the growth margin, you have mentioned volume discounts to large customers, and that was introduced in Q1 last year, so likely fully impacting Q2. Price increases from operators was first mentioned in Q2, and likely then fully impacting Q3, or at least in Q4. Then it was the fixed volume contract that was introduced mid-2021, and there we know that should end in June. I mean, these, when these things play out, you should start to see easier comps. Did the timing that I said, was that correct? Hence, should we start to see at least easier comps from Q3 and onwards? Thank you. Stefan, I'll try to reply to that one. I think you're right in highlighting, you know, some of the things that we've talked about over the past years that affect our business. You know, at any given point in time, we try to bring up, of course, the most material aspects that affect performance. You're also right that, you know, sort of how the math works out is that typically 12 months after a deterioration, you know, you are facing easier comps, right? That sort of creates relief unless you see, you know, continued underlying pressure or something new arising. I think what we're careful to avoid is to say, you know, on a total level, you know, things will improve by this and this time. We can confirm that there are numerous factors that, you know, will ease, you know, gradually during 2021. Of course, if nothing else happens, then that should, you know, reflect an improvement in our numbers. With that in mind, we're very careful to avoid any hard statements. As you know, we're, it, some parts are quite hard to predict. If I mention one concrete such area, so some of the carrier price increases that we talked about, you know, do not make a lot of sense from our point of view. Of course, that makes, you know, forecasting carrier behavior in that sort of situation a little tricky. That's not necessarily representative of all carriers or all parts of the world, but, you know, in this particular case, and if we talk about Latin America, that's the case, right? It makes it harder. Roshan, anything you wanna add to that? No, I think that's good. Regarding OpEx, you mentioned that you have sort of put the brake on that during Q1. Should we expect that it can be much more stable going into Q2, Q3, et cetera? Yes, we put a brake on the messaging and core functions just to, I mean, running it through the business units means that you gotta own the business units that grow, gotta continue to grow, right? And the business units that don't grow, gotta, you know, they gotta tail it off. That's how you have to run it, right? Yes, we've done it in messaging core functions. And we very much see employees, which is the largest part of our cost base tailing off. We see that right now. But in Q1, we still have the backlog effect from hires down during late and mid 2021, right? That's what we expect because we will follow our commitment to run the GP and OpEx growth over time in line. This is what we have talked about a couple quarters. It's hard to time exactly, especially when you do like what we did here. If you consider we were growing very, very rapidly organically, and we did M&A driven growth, and we needed to take investment to support that, and then the organic growth tail off. It's hard to do that quick enough, right? You always wished you did it quicker, but that's what's happening right now, and then we have to do it a little bit, you know, make sure we match it over time. Okay. Thank you. Thank you. Operator, next question, please. Thank you. Your next question comes from Daniel Djurberg from Handelsbanken. Operator, thank you for the question. First question would be a little bit if you can comment a little bit. You have one of the market's most comprehensive CPaaS portfolios now, obviously early days, but can you give us any proof point that your best of breed strategy really work with regards to cross-selling that could create better customer stickiness as well? That's the first question. Thank you. No, definitely. I mean, the most or one of the most concrete examples of that is cross-selling of emails, and we sold two customers in Q1 and then continued in Q2. We stated one of those customers was one of the top ten global tech companies. I think I'd say the contract as such is a good solid contract, but it's not massive and huge, so let's not, you know, read too much into that individual contract. I do think we see the trend of walking in with our total portfolio into these very large customers as a very positive reception. That we know now. That is exactly what I think we were after with combining this group. I think we see strong signal there on everything from small to very large customers. Perfect. My second question, if I may, would be on the you mentioned the pricing in Brazil and in India, and also it made sense for operator raising prices to this level. But still, since volumes are still kept quite high and the growth is, i.e., when the CPaaS players take the hit, so to say, in margin, why doesn't it make sense for them? Why shouldn't the price increases continue, given that the buffer is, so to say, the CPaaS player right now? What do I miss? Yeah, I don't think—I mean, CPaaS is only a small portion of the buffer, right? If you increase the price with 30% like they did in India and Brazil, a small percent of that is obviously gonna be buffered by us in this case, but the majority is taken by the customer. What's happening then is the customers eventually starts to find other channels, which may be, you know, WhatsApp or so, which comes back to us in revenue in another channel. That's when the operator takes the price, takes the hit, right? It's not the full monopoly, because there are other channels to customers, and therefore, you know, they will eventually see that, all right, that strategy doesn't work. Okay. Thank you, and good luck in Q2. Yeah. Again, I mean, the pricing is nothing new. It has happened many times before. It is unfortunate when it happens, but we've seen it many times before, and we have this pattern, and then after a while you get back to solid margin and growth, right? That's nothing new in this market. Thank you. Operator, next question, please. Thank you. Your next question comes from Andreas Markou from Berenberg. Yes. Hi, everyone. Thanks very much for taking my question. The first one is kind of a follow-up on Brazil and India. I guess, what is your conviction that you can actually pass on these price increases in the next couple of quarters, given that, I think the general economic expectation is that the macro situation will remain, quite difficult, in those countries? That's the first one. Thank you. Thank you. Thank you. I'll start off with an answer to that one. I think you need to differentiate two factors here, right? It's what you're essentially seeing is a margin compression due to these changes, right? Just the way the math works out is 12 months later, you will have annualized that deterioration and your comparables improve, right? That we can say with some confidence, of course, that, you know, 12 months after a deterioration, things get a little better unless something new happens, right? That's relatively mechanical. Of course, whether you can actually recoup or, you know, pass on, the actual rate rise to end customers is a little bit of a different question. What we've said in Q4, and I still think remains true, is, you know, for India it's more clear. The COGS increases has a very specific nature and is related to a technological improvement, due to digital ledger technology to combat spam, which is genuinely a good thing for the market, right? It just takes time to pass it through. In Brazil, it's more a question of tough competition and sometimes irrational competition, where it's harder to call, you know, how that will develop. To round things up, the annualization, of course, takes 12 months. Mm-hmm. Okay. I guess you are confident of being able to pass this on in the next couple of quarters? No, that's not what we said. I think what we said is that after 12 months, you know, 12 months will have passed. Yeah. We will annualize. Okay, maybe on the second one, just on Inteliquent, can you give us a bit more detail on the steps you are taking to improve the growth in the coming quarters? Obviously, you mentioned again the mechanical factors, the impact of 8YY tailing off, but what are the actual steps you're taking to materially improve growth here? Yeah, you're correct. There are two mechanical factors, 8YY tailing off, and you have got the COVID effect, the other third of percent sudden increase in when COVID came. That's the two things that are mechanical, if you will. The other area, it's three areas. It is internationalization of their offerings. We're now in Germany, France, and the U.K. And in there, they have launched services or deep services, and there we're now starting to win customers. That's one. Number two is we're increasing their sales and marketing efforts. If I remember correctly now from the acquisition, I think they're at the acquisition, 8% of their OpEx was in sales and marketing. I may be wrong on that 8YY number with 1% or 2%, but a very low percentage. We're increasing the sales and marketing effort, and it's very logical. They have a very large network, a very strong network, but not enough resources in sales and marketing, and therefore they're not really capitalizing enough on the network. That's number two. Number three is an increased focus on programmable voice and selling into enterprises. Inteliquent has traditionally not had a solid software offering on top of their network, and they have not tried hard enough to sell to enterprises. They mostly sell to what they call carrier service providers or maybe CPaaS providers or the UCaaS and the CCaaS providers. The very large providers is what they've sold to, but they've not sold to enterprise. That's basically an untapped market for them, and we're addressing that market as well. That's the three main growth bets for Inteliquent. Mm-hmm. Okay. Thank you very much. Best of luck with everything. Thank you. Thank you. Your next question comes from Mohammed Moawalla from Goldman Sachs. Great. Thank you. I had two questions. Firstly, you know, obviously you're managing, you know, a series of headwinds, you know, some related to obviously the pricing of the telcos. You're also kind of busy integrating acquisitions. You know, as we start to somewhat look at these headwinds and how they start to shift, I know with the telco pricing, you're saying this may take several quarters, but in terms of kinda your own kinda integration of the acquisitions, how should we think of this in terms of impacting that sort of growth profit evolution? You know, should we see that we're kind of at a troughing point in kind of Q4, Q1? Is that trough gonna be perhaps a bit longer, and then 2023 is really more the year of a step up in kind of growth profit acceleration? The second question I had was, if you see volumes move from SMS to sort of WhatsApp, will this be kind of gross margin accretive? When the telcos kind of hike up prices a lot, how much of this could drive channel shift as well? Thank you. Um. Do you want us to? Sorry, go ahead, Oscar. Yeah. Maybe start with the first question. I'll take the second. I mean, on the pricing side, Mohammed, I mean, you know, the pricing, telco pricing side and the integration, I mean, of course, you know, what we see essentially as Thomas mentioned earlier, is you have this annualization effect, right? And in the markets that we've already talked about in the previous quarters, I mean, you have this annualization effect, which will run out, you know, during later quarters this year. I think what we're seeing is, you know, we've seen positive signs from the integration of SDI. I think that's something that we talked about during 2021 as a drag on growth. I think, you know, right now it's not, you know, it's not as much of a worry and, you know, and I think it's being integrated very well. One of the things that you might like to remember is also the fact that the acquisition of Wavy in LatAm became a part of the organic growth. From February of 2022, because that acquisition was closed in the beginning of February 2021. Sequentially, you know, the weightage of LatAm in the organic base has grown in Q1 compared to Q4 last year. From a tailwind perspective, I think, you know, what you're seeing essentially is the margin profile changing, you know, due to the acquisitions that we've done in late 2021 and, you know, the gross margin kind of going up to 36%. I think that is something as we see more cross sale of email and voice as well as SMS and WhatsApp to our customer base. You know, we should see a positive development in, you know, all else alike, positive development in the gross margin development over time. Hopefully that was the answer to your first question. Oscar, I don't know if you want to comment specifically, add to that or comment specifically on the SMS to WhatsApp. Yeah. The SMS to WhatsApp, it is, it's two things, right? One thing that happens is just the transaction volume moving from text to WhatsApp. I think that's equal or hard to tell what the margin is on the pure sending transaction. What does happen is, with WhatsApp, you get the more interactive solution. People start respond a lot more. When people start respond, you also need to maybe sell a bot to it. You get into selling also more of a proper SaaS service on top of the channel, and that is typically driving up gross margins. Transaction level may be similar, but in some cases lower, in some cases higher, a little bit depending on. You have the kind of the SaaS service on top, which is typically higher. That's typically what happens, right? Got it. If I could come back to my first question. I guess what I was trying to kinda better understand is as we think of the growth trajectory, what I was trying to say is the year this year gonna look very, very similar to what the last few quarters has been? Or is there kind of chances of a kind of re-acceleration spike, you know, at the back end of the year? Or should we wait till 2023 before we see kind of the full effects of kind of growth acceleration? Yeah. I mean, we don't give forward-looking projections, but from our perspective, we obviously work really hard to get to the increased gross profit growth. Again, it's like, get our revenue involvement growth down to the gross profit level. I mean, that's what we're talking about here, right? It's not like customer's not paying, it's not like we're not growing on the top line side, but it's getting that down to the gross profit level. We're working really hard to do that as soon as possible. Exactly when it happens, it is a little bit hard to tell. But previously when we see this, it's a couple of quarters, and then we have previously gotten back. That's what we're working on. Thomas, I don't know if you wanted to add anything. No, that's clear. Thanks. Thank you. Thank you. Your next question comes from Fredrik Lithell from Handelsbanken. Thank you very much for taking my question. Just I was thinking about messaging with the -1% organic gross profit growth, and you allude to many factors behind that. Have you done your own sort of calculations and taken out 1 or 2 or 3 or 4 of the volume commitments situations? Or have you taken out the Brazil and India effects and see what sort of the remaining underlying entities are doing in terms of organic gross profit growth? Is that sort of an elaboration you do and that you could share with us? Would be the first question then. The second one is on Inteliquent again. If you could sort of elaborate a little bit on the split between the CPaaS unit and the interconnect unit and how they are progressing and how they sort of combine into the trend you have right now? Thank you. Thank you, Fredrik. I'll start with the first one. What we have disclosed in terms of the different components of messaging, so we've quantified the effect of this fixed price agreement that we, you know, first talked about in Q4, which had a -SEK 37 million effect, 5% on gross profit growth in Q4. So -SEK 15 million for the total group and -2% effect on gross profit in Q1. So that's been quantified. In terms of separating out the effect of individual carriers, I mean, price changes and, on the other hand, talking about price changes towards customers, of course, we do a lot of math. It's not perfectly clear-cut in the sense that an interdependency, right? You know, the one thing actually affects the other. Mm. What we've said is, these are the two main things we wanna call out in why the healthy revenue growth that we see is not translating currently into gross profit growth. Okay. Thank you. On the Inteliquent question, the CPaaS versus interconnect. I didn't really understand that question. I think, to give some background, and then Oscar, I'll hand back to you. I mean, when we acquired Inteliquent, we said about half of the business is carrier related and half of the business is enterprise related or more CPaaS oriented, right? Yeah. Exactly. That's the split, and we've said that long, you know, we will invest to grow on the enterprise side. This is one of the aspects Oscar alluded to earlier. You know, this has been in the books for a few months. There hasn't been any material changes since last. We could come back perhaps with more details. It's an interesting topic and of course a source of long-term growth acceleration in Inteliquent. All right. Thank you. Yeah. Yeah, no material changes from previously. I mean, we only closed that acquisition a couple of months ago. We see the low traction on the internationalization. Happy about that. We start to see traction on the enterprise outside. Happy about that. It's a big base, so in total numbers effect impact right now, there's no material impact on the numbers yet even though they see the early signs, right? Okay. Operator, next question please. Thank you. Your next question comes from Pontus Wachtmeister from SEB. Hi, guys. Thanks for taking my question. When we spoke a while back, you mentioned that these amortizations, the PPAs, they were not fully tax-deductible. Looking at the first quarter, it doesn't seem like they have been tax-deductible. Is there anything you have changed in your how you look at those? Or did I misunderstand the first time? Pontus, thanks for the question. I think you know, the tax deductibility of you know, acquisition-related assets and depreciation for acquisition-related assets varies a lot from country to country, from jurisdiction to jurisdiction. In some countries, you know, we can even amortize goodwill and obtain tax deductions for that. There's also you know, sometimes we need to perform pushdown accounting or merge entities to be able to get that tax deductibility. This is something that we are working with and you know, in these jurisdictions, both working internally and with external advisors you know, to find optimal structures, right? That we responsibly pay tax, both for our shareholders and for those countries we operate in. You know, I don't think there's a straightforward answer that you know says that all of that is tax-deductible or all of it is not tax-deductible, but rather it's kind of a mixed answer per jurisdiction. I think in general, an effective tax rate you know that we've reported as we've reported this quarter you know and maybe a little bit north of that is a fair assumption to have in the medium term for Sinch. Exactly. It's okay. There's at least some of it won't be deductible, I can try and Yes use as a proxy, but not all of it. Yeah. Okay. Thank you very much. Your next question comes from Daniel Thorsson from ABG. Yes, thank you very much. I have a question on the demand side. We basically see all of you CPaaS players growing healthy on top line. You had a 22% organic sales growth this quarter, even though it has been coming down a bit lately. If we leave the COGS challenges out for now, where do you see growth coming from? And is there a risk of deceleration further during 2022 as we leave the pandemic behind us to a larger extent? I mean, if we see a slower organic sales growth, even a stabilization of the gross margin would result in pretty modest GP. Just to try and understand the demand situation, how do you see 2022 developing? No. We see, you know, in general, a solid demand for CPaaS services, and I think all the trends and projections that, you know, people have done, like Gartner from, what is it? 15%-80% of all major enterprise customers will, you know, buy CPaaS services up until 2025. We see those trends happening. I think demand side is good in general, and we see a lot of demand for the services across all the different product lines. So no reason to- No to assume a slower growth on sales organically during 2022? No, I don't think so. I think it's more than down to the sheer size. I mean, as you get larger and larger and larger, right? But it's. We don't see any slowdown in the market or slowdown in interest from the customers or slowdown in their willingness to pay for these type of services, no. You may, of course, have, you know, in a pocket here or, you know, something happen there or not in general. Okay. In general, we believe we're in a very strong market and very well positioned. I 100% agree, you know. The organic growth side needs to be higher, right? In general, you know, strong market, strong position. Excellent. A question for Roshan, the technical one. The SEK 440 million amortization of acquired assets in Q1, is that a fair level to expect going forward as well, or anything moving in Q2 here? No. I mean, you know, that might change marginally during the course of the year because, you know, purchase price allocation is only preliminary when we first record it, and we have a 12-month window post completion of the acquisition where we review the purchase price allocation and make adjustments as necessary. We can come back to that and explain more. Okay. So far, we can assume that level going forward, I guess. No direction here that you can guide on. Yeah. That's fair. Yeah. Thank you very much. Thank you for that, and thank you, operator, for all the questions. I'll hand the word back to Oscar for concluding remarks. All right. Thank you for your interest. Obviously Sinch has historically been providing very solid growth numbers organically and solid M&A growth numbers. These two quarters we did hit the M&A-driven non-organic growth numbers. We did not hit the organic growth numbers. That is our number one focus going forward. We are very happy with the position we've taken, and we see we have a very, very strong position in this market. We do believe this is a very strong market going forward and a very large market, and we are excited to continue to work in it. I think that will conclude the remarks for this presentation, and thank you a lot for listening, and thanks for asking all the questions. Thank you very much. Thank you. Bye. This does conclude today's conference call. Thank you for participating. You may now disconnect.