LINK Mobility : Q2 Interim Report 2023

LINK Mobility Group Holding ASA

Interim financial report Second quarter 2023

16 August 2023

linkmobility.com

Highlights second quarter

• Revenue reported at NOK 1 652 million. Organic growth in fixed currency 23%
• Gross profit reported at NOK 410 million. Organic growth in fixed currency 15%
• Adjusted EBITDA reported at NOK 191 million. Organic growth in fixed currency 32%
• Cash generation after capex and interest of NOK 129 million in the quarter
• • Group leverage continued lower to 4.0x from 4.3x in the previous quarter
• LINK signed 715 new and expanding agreements in the second quarter
• • New signings increased 25% YoY supporting long-term growth momentum

Total operating revenues NOKm		Adjusted EBITDA NOKm
NOK million		NOK million

Customer accounts		Net retention rate in fixed currency
NOK million		NOK million

LINK Mobility Holding Group ASA

Organic growth drives deleveraging

LINK Mobility (LINK) reports revenue of NOK 1,652 million, growing 40% in the second quarter of 2023 with continued strong FX tailwind. Organic revenue growth in fixed currency was 23%. Gross profit and adjusted EBITDA were reported at NOK 410 million and NOK 191 million respectively, with organic growth in fixed currency of 15% and 32%. The US business continued its strong performance despite no critical events messaging in the quarter. Europe improved with better retail volumes YoY and opex reductions delivered ahead of plan. Strong free cash flow generation in the quarter of NOK 129 million supported leverage declining further to 4.0x. LINK reiterates its forward-looking statement for 2023 for an organic adjusted EBITDA growth of 12-15% in fixed currency.

LINK continued to experience strong momentum in the US with high growth in messaging solutions from both new and existing clients. There were as expected no critical events messaging in the second quarter, as it is a seasonal business related to winter storms in Q1 and mainly droughts and hurricanes in H2.

In Europe, the enterprise segments experienced higher growth with improved retail activity YoY and increased contribution from a higher contract backlog. Execution on both commercial initiatives and cost reductions supported improved profitability.

Reported revenue increased 40% YoY to NOK 1,652 million in the second quarter, with underlying organic revenue growth at 23% in fixed currency. The underlying growth was driven by organic revenue growth of 79% in the US and 64% organic growth for Global Messaging. The European enterprise segments posted an organic revenue growth of 12%.

Gross profit grew 29% to NOK 410 million in Q2 23 with an organic gross profit growth in fixed currency of 15%. The gross margin was negatively affected by a higher share of Global Messaging, while a larger US business almost fully offset a margin dilution effect from scaling of global clients in Central Europe.

Adjusted EBITDA increased 48% to NOK 191 million in the second quarter, with organic growth at 32% in fixed currency. Strong US growth and cost reduction initiatives in Europe drove an improved adjusted EBITDA margin to 11.8% in fixed currency, increasing 0.8 percentage points YoY.

The cost initiatives announced last year have now effectively been completed with an annualized FCF effect of more than NOK 100 million. Reported costs have however been elevated by FX as NOK has depreciated versus most other currencies YoY.

Reported messaging volumes increased by 21% in the second quarter. Richer channels, with higher price points, continue to gain traction in selected markets, albeit from low levels, supporting revenue growth slightly above volume growth.

SMS One-way messaging (mill messages)

Other messaging (mill messages)

LINK Mobility Holding Group ASA

Forwarding-looking statement

LINK expects organic adjusted EBITDA growth of 12-15% in fixed currency for 2023, driven by higher gross profit growth than in 2022 and opex savings from cost reduction initiatives. The higher growth in profitability reflects significantly improved commercial momentum with increased inflow of new business, opex reductions ahead of target partly offsetting underlying cost increases and the dilutive effect on growth from non-recurring covid traffic out of comparable figures from Q2 23. Uncertainties however remain for H2 2023 related to macroeconomic activity and weather related seasonality for critical events messaging in the US. LINK reiterates its forward- looking statement for 2023.

LINK has a highly scalable business model with significant scope for margin expansion through organic growth and increased scale from acquisitions in coming years.

New agreements signed

LINK signed 715 new and expanding agreements in the second quarter, securing significant new revenue and future growth potential. The new agreements consisted of 513 signed direct customer contracts, 34 signed partner framework agreements and 168 new partner customers.

Market trends towards advanced solutions

Market adoption for selected CPaaS products are accelerating as observed by LINK's new contract wins.

In the market for notification use cases, applied for essential information, there is stable demand and underlying growth momentum estimated in the high single-digits. Growth is driven mainly by alerts, reminders, payment and security products while demand for two-factor authentication (2FA) use cases are stable.

Mobile marketing use cases are increasingly adopting new channels. Demand for new channels with a richer feature set are accelerating and use cases are evolving from one-way mass communication to more conversational solutions. European retail markets are still impacted by macroeconomic uncertainty, but has improved from the weak activity observed last year.

Customer service is growing quickly albeit from lower volumes contributing about 10% of group revenue. Parts of IVR (automated telephone systems) are being replaced by messaging services which enhance consumer interaction and reduce supplier costs. Chatbots and new channels in demand are more time- consuming to implement and scale.

LINK Mobility Holding Group ASA

Financial Review

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

Group income statement

Total operating revenue amounted to NOK 1 652 million (NOK 1 177 million) or a reported growth of 40% versus the same period last year. Organic revenue growth in fixed currency was 23% with currency translation effects in the quarter of NOK 207 million related to depreciation of NOK against most foreign currencies. Revenue growth momentum improved in European Enterprise regions improved to 12% in fixed currency after shedding strong covid traffic comparables and positive contribution from new contracts signed with both existing and new clients. The positive trending on signed contracts during last three quarters is gradually being implemented in the respective regions and contributes to growth as clients start scaling traffic on their respective use cases. The US business growth was 79% in fixed currency from messaging solutions related to implementation and reccurring revenues from existing and new clients. Critical event revenue was limited as per normal seasonality in the quarter. Although the growth momentum is positive and contract backlog solid we view the macroeconomic uncertainty still present and impacting countries, segments and clients in various degree.

	Total operating revenues (mNOK)			Gross Profit and Gross Margin
NOK million	NOK million

Gross profit growth reported at 29% to NOK 410 million in the quarter. In fixed currency the gross profit growth was 15% improving from first quarter as growth momentum in the European enterprise segments and Global Messaging segments strengthened. The gross profit growth in the European enterprise segments was 7% in fixed currency.

In fixed currency the growth in gross profit in the US was 52% driven by messaging solutions related to existing and new clients.

The total Group gross profit margin was reported at 24.8% (26.9%) impacted by higher share revenues from the low-margin Global Messaging segment, consolidation of customer base in the US and growth on larger Global clients in Central Europe. The enterprise margins remained fairly stable across segments and was only impacted by normal fluctuations related to client and product mix effects.

LINK Mobility Holding Group ASA