LINK Mobility : Financial Presentation Q2 2022

LINK Mobility Group Holding ASA Interim financial report

Second Quarter 2022

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Highlights Second Quarter

• Reported revenue grew 12% to NOK 1,177 million in Q2 22
• • Organic revenue growth 4% due to high comparables and a softer market
  • Underlying organic growth of 11% when adjusting for high Q2 21 comparables
• Reported gross profit increased 18% to NOK 317 million in the quarter
• • Organic gross profit mirrored the revenue development
• Reported adjusted EBITDA growth of 8% to NOK 129 million
• • OPEX increased by NOK 10 million related to GTM investments initiated since H2 2020
  • OPEX reductions have been implemented to align cost with gross profit growth
• Strong cash flow from operations in excess of NOK 200 million Q2 22
• • Free cash flow of NOK 100 million after capex and interest payments
• LINK signed 571 new and expanding agreements in the second quarter of the year
• • Good momentum in new customer wins with strong potential for future growth
  • Longer ramp up times for new contracts in adoption of more advanced CPaaS solutions

Total operating revenues (mNOK)		Adjusted EBITDA (mNOK)

NOK million		12 %		NOK million		8 %
1500
	1 297					176
		1 174	1 177
	1 112			152
1 055
		80			142
					129
1000					119
								22
500
0					Q2'21	Q3'21	Q4'21	Q1'22	Q2'22
Q2'21	Q3'21	Q4'21	Q1'22	Q2'22
				Acquired	Organic

Customer accounts

Pro forma net retention rate in fixed currency

43 978	2 963	817	47 758

Q2'21	Organic	Acquired	Q2'22
	growth	growth

Group1

109 %	123 % 114 % 112 %
	100 %
Q2'21 Q3'21 Q4'21 Q1'22 Q2'22

Enterprise clients2

113 % 117 %	109 % 107 %	101 %
Q2'21 Q3'21 Q4'21 Q1'22 Q2'22

1. Net retention rate (NRR) including all client segments. NRR is net change in revenue from upsale, downsale and churn of existing customers YoY. New customers are excluded

2) NRR excluding aggregator clients. Includes markets counting for more than 80% of total transaction revenue

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Copyright 2022 LINK Mobility. All rights reserved.

Adapting to challenging macro environment

LINK Mobility (LINK) reports revenue growth of 12% to NOK 1,177 million in the second quarter of 2022. Organic revenue growth in fixed currency was 4%, whilst underlying organic growth was 11% when adjusting for high Q2 21 comparables. Continued organic growth is supported by a stable performance in customer acquisitions and very low customer churn. Gross profit increased 18% to NOK 317 million. Organic gross profit was affected by the lower revenue growth and mix effects. Adjusted EBITDA grew 8% to NOK 129 million. Organic adjusted EBITDA was negatively impacted by OPEX growth related to commercial investments. OPEX reduction initiatives have been implemented to improve profitability. LINK revises its 2022 forward-looking statement to an organic revenue growth range of 8-12%(14-17%) due to slower than expected growth in H1 22 and increased macroeconomic uncertainty.

Increased macroeconomic uncertainty impacts the digital messaging industry differently depending on use case. Retail volumes, often linked to mobile marketing use cases, are exposed to a decline while notifications use cases, used for more essential communication, are expected to sustain growth. For efficient customer care solutions, which reduce costs and increase customer satisfaction, new growth opportunities are expected. Overall, LINK is well positioned for continued growth, albeit at lower than historical levels as customers adjust to the new economic climate. Longer-term, LINK sees large upselling potential for its more advanced products as market adoption rates catch up with the rapid technological advances over recent years.

In the current environment, LINK will enhance its focus on current growth and cash generation. Stable performance in customer acquisitions and low churn continue to fuel future growth. However, longer lead times to scale revenue from new advanced CPaaS solutions and a previous focus on building market adoption have reduced the execution of near-term growth opportunities. LINK will now prioritize mature products and selected CPaaS solutions with proven demand and reduce OPEX and CAPEX to ensure continued strong FCF generation. Consolidation of acquired assets will further extract costs and contribute to revenue synergies.

Reported revenue increased 12% to NOK 1,177 million in the quarter compared to the same quarter last year. Organic revenue growth of 4% in fixed currency, whilst underlying organic growth was 11% when adjusting for high Q2 21 comparables. Q2 last year benefitted from the reopening of shops and pent-up demand as lockdowns ended and high Covid related traffic in certain markets. Softer market conditions in Q2 22 reflecting increased macroeconomic uncertainty also contributed to lower organic growth in all markets YoY.

Gross profit grew 18% to NOK 317 million and the gross margin increased to 26.9% (25.4%). Organic gross profit growth in fixed currency was negative 1%. Underlying organic growth was positive 5% when adjusted for high Q2 21 comparables.

Adjusted EBITDA increased 8% to NOK 129 million. Organic adjusted EBITDA in fixed currency declined due to high comparables and higher OPEX related to go-to-market (GTM) commercial investments to build market share for new advanced CPaaS products.

Messaging volumes increased 7% in the second quarter to 3 564 million compared to the same quarter last year. Pro forma organic growth in volumes was negative 2%.

Million messages / Price per message in NOK

5000

Pro forma Messaging volume in million

600000 %					3 629		4 075	3 691	3 564
		4 049			3 426
3 337	3 404	3 691	3 564
	2500
300000 %
0,298	0,300	0,296	0,295	0,293
0 %					0
Q2'21	Q3'21	Q4'21	Q1'22	Q2'22
Q2'21	Q3'21	Q4'21	Q1'22	Q2'22	3

Copyright 2022 LINK Mobility. All rights reserved.

Acquisitions and pro forma

LINK acquired several companies last year which were consolidated throughout 2021. The effects from these acquisitions have now largely been included in reported last twelve-month (LTM) figures as larger transactions closed more than a year ago. The table below shows reported and pro forma (full-year effect of closed acquisitions) LTM Q2 2022 figures. Pro forma financials are based on management estimates given available information.

LTM Q2 2022 (NOK million)	Reported	Pro forma
Revenue	4 760	4 772
Gross Profit	1 324	1 328
GP.margin	28%	28%
Adj.EBITDA	600	603
Adj.EBITDA margin	13%	13%

Revised forwarding-looking statement

LINK revises its 2022 forward-looking statement to an organic revenue growth range of 8-12%(14-17%) due to slower than expected growth in H1 22 and increased macroeconomic uncertainty. The net retention rate is expected to be 3-4 percentage points lower than organic revenue growth reflecting historical contribution from new client wins. OPEX increases related to GTM initiatives will be reverted by cost reductions and continued strong cash generation will support deleveraging.

Forward-looking statement

	2022
FY organic revenue growth	8 - 12%

LINK retains its ambition to become a top 5 global CPaaS player and sees long-term organic revenue growth of 20% per year with traction on adoption of advanced CPaas solutions. Reflecting the revised 2022 forward-looking statement, the timeline to reach pro forma annual revenue of NOK 10 billion, from both accretive acquisitions and organic growth, has been extended to 2025 from 2024. LINK's highly scalable business model will support a pro forma adjusted EBITDA margin in the 15-17% range at a revenue level of NOK 10 billion.

Forward looking statement

	2025
Pro forma revenue (NOK million)	10 000
Pro forma adjusted EBITDA margin	15% - 17%

New agreements signed

LINK signed 571 new agreements in the second quarter of the year (new and expanding), securing significant new revenue and future growth potential. The new agreements consisted of 401 signed direct customer contracts, 47 signed partner framework agreements and 123 new partner customers.

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Copyright 2022 LINK Mobility. All rights reserved.

Financial Review

(Figures in brackets refer to the same period last year)

Group income statement

Operating revenue amounted to NOK 1 177 million (NOK 1 055 million) or a reported growth of 12% versus the same period last year including acquisitions. Organic revenue growth in fixed currency was 4% with only limited currency translation effects in the quarter. High comparables driven by reopening of retail after the pandemic and high volumes related to Covid testing and vaccination last year negatively impacted the growth rate by approximately 7 percentage points. LINK observes a softer market in parts of the footprint related to a weaker macroeconomic outlook, which also impacted the second quarter growth momentum. Global messaging revenue remained stable YoY. Messaging revenue grew 9% in the quarter and less than total revenue growth at 12% with a higher contribution from licenses.

Total operating revenues (mNOK)
Messaging revenue (mNOK)

2000	NOK million		+12%		1600	NOK million		+9%
	1 055	1 112	1 297	1 174	1 177	994	1 023	1 200	1 087	1 088
1000			80				45
				800
0	Q2'21	Q3'21	Q4'21	Q1'22	0	Q2'21	Q3'21	Q4'21	Q1'22	Q2'22
	Q2'22
					Acquired	Organic

Reported gross profit grew 18% to NOK 317 million in the quarter. Organic gross profit was affected negatively by the high comparables last year reducing organic gross profit growth by ~ 6 percentage points to negative1% compared to same quarter last year in fixed currency

The gross profit margin expanded to 26.9% (25.4%) with a positive effect from the consolidation of Message Broadcast. The enterprise segment impacted the organic gross margin negatively by

1.4 percentage points related to mix effects and price increases passed on to clients lowering gross margin but with stable gross profit per message. The Global messaging segment was accretive to the total gross margin in the quarter.

Total operating expenses amounted to NOK 188 million (NOK 149 million) or a growth of 26%. Organic growth in operating expenses was 7% related to investments in GTM initiatives, centralized billing capabilities and costs related to supporting a larger commercial footprint. LINK has initiated OPEX reduction initiatives to ensure continued strong cash flow generation. In the second quarter, NOK 4 million in costs was recognized reflecting a claim from French tax authorities for telecom tax on revenue in France dating back to 2019. The tax is intended for the mobile operators and LINK is challenging the current claim. The estimated potential liability for periods since 2019 is NOK 13 million and has not been recognized in the second quarter financials.

Adjusted EBITDA, before non-recurring cost, was reported at NOK 129 million (NOK 119 million) or 11.0% of total revenues (11.3%). Organic adjusted EBITDA declined mainly due to high comparables combined with higher GTM investments and negative impact from the recognition of the French telecom tax. Gross profit to adjusted EBITDA conversion remained above 40%.

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Copyright 2022 LINK Mobility. All rights reserved.