Sinch AB (publ) (SINCH) Earnings Call Transcript & Summary

Welcome to the Sinch Q3 2020 Investor Presentation. [Operator Instructions] Just to remind you, this conference call is being recorded. Today, I am pleased to present Thomas Heath, Chief of Strategy -- Chief Strategy Officer and Head of Investor Relations. Please begin your meeting.

Thank you very much, operator, and welcome, everyone, to this Q3 results presentation with Sinch AB. My name is Thomas Heath. I'm Chief Strategy Officer and Head of Investor Relations. With me on the call today is our CEO, Oscar Werner; and our CFO, Roshan Saldanha. As a reminder, to everyone dialing in, whilst this call is open to everyone, questions are reserved for investors and analysts. And with those opening remarks, I'll hand the word over to our CEO, Oscar Werner.

Thank you, Thomas, and everyone, welcome to this Q3 presentation from Sinch. So operator, if you could move to Slide 2, please. So as you can see, we're now -- revenue past 12 months, SEK 6.6 billion and adjusted EBITDA of SEK 786 million in the past 12 months. And we're up to now with the closed acquisitions of 1,484, and under them present in 41 local countries. We do, like we've said, customer engagement through mobile technology. So any way enterprises wants to engage with their consumers via mobile channels, that's where we come in. And that may be via messaging, it may be via voice or video. So a video example would be your -- connecting your call to your doctor, making that call -- the call with the doctor online working or calling your ride-hailing service, and we would connect the call to ride-hailing service via voice or messaging. You may get a reminder from your dentist or your -- a ticket from your airline, then we would transmit those messages. We are now up to 107 billion engagements per year. This includes ACM. So -- and you can see that has gone up pretty significantly since the last presentation, and that is due to the huge volume in India with the SDI transaction. So very much -- a very high increase on that number, and we're going to come to that through the presentation. You're going to see the volumes going up. But then obviously, in India, the gross profit per transaction is lower than in U.S. and Europe. We are serving 8 out of 10 of the largest U.S. tech companies. We're working well and closely with a lot of these companies, and they're an important, by far, the only customer group, but an important customer group for us. Fascinating thing with this market, it’s got to 100% consumer penetration. We are yet to meet one single person of the adult population since I joined Sinch that is not a user. I know that you all have used or received messaging voice or video services, but -- of the types I just said before. We're very proud that we've been profitable since our foundation in 2008. That's the way we run the company. We think it's a good way to run the company of always delivering a lot of value to customers and therefore, being able to be profitable. Operator, next slide, please. So if you look at -- we have a track record of profitable growth. Here you see the gross profit and the adjusted EBITDA development of the last couple of years. And you see the impact of the last acquisitions with ACL and SDI, which are now closed and then Wavy, which we're still working on closing for. And you see the impact of both our adjusted EBITDA and gross profit in this chart. We take a major leap going forward now with the last acquisitions we've made. In Q3, 40% gross profit growth and 53% growth in EBITDA in Q3 '20. All right. Operator, let's move to next slide, please. The reason we can do what we're doing and continuing on growing as we have been doing is partly -- it's a good market. We're in a very good market right now. And the other part is we are having good performance and relative to the market as well. The messaging side, which is our largest segment. This is a $17 billion market on SMS only and as per Mobilesquared. And the business usage of SMS, our base service is continuing to grow. Then we're also seeing plus 100% growth rates in the new messaging channels, such as WhatsApp, RCS, Viber, KakaoTalk. And the reason for that is very simple. It's -- you have the same read rate -- very high read rate -- very high response rate, as you have with text, but you have a richer format message. So you can actually send more and make a more attractive experience for the consumer. And therefore, you're seeing very, very high growth rates in those areas right now. The other part of this market is the CPaaS market where you typically say value-added on top of just delivering the message or just connecting the voice or video call. There, you see a lot of value-added services for -- in our example, it would be like Chatlayer services where you have an NLP service. And in that area, you're seeing 30% to 50% growth roundabout. So in principle, we are in a really good market with a base business of SMS, which is big and growing, but a little bit slower lately. Then you have a very fast-paced growth in the WhatsApp and RCS or new messaging formats business. And you have a very solid growth in the software value on top. That's kind of, if you would summarize the market in 3 different areas. Operator, if you go to Slide 5, please. What is really happening in this market? Or what happened in the first 30 years in this market was basically enterprises realized that there was a move from -- there was an additional channel to email, which is SMS. The reason enterprises adopt SMS is pretty simple. It has much higher open rate. Typically, we say it's 98% open rate and 95% read rate within 3 minutes, which you will know beats e-mail hands down. So enterprises realized, hey, if I got a short, simple message to tell, text messaging is a more effective way to get attention of consumers than e-mail. And that's why that market grew to SEK 17 billion. Now text has one major limitation, and that is -- it's only 160 characters, and it's text only. That limitation is now removed with the next gen messaging formats, being RCS, WhatsApp, Facebook, [ KakaoTalk, Chatlayer ]. There is a lot of those channels. So what's happening is basically, you can keep the high open rates, but you get an app-like experience instead. So the #1 limitation of text is being removed, while you keep the big benefits of the high open rates, and that is something that we think is going to grow this market for the coming 20 years. We believe this is going to be a gradual evolution, and the prices are slow to adopt. And there's a lot of them. We're talking about communicating to every single consumer in the world. So this is millions of enterprises. That's going to be a gradual approach. But it's going to drive growth going forward in this market. Operator, Slide 6, please. Just one example of what we're talking about, here we're doing an RCS campaign for a company called Cdiscount in France. Cdiscount is an e-commerce company, and they're doing an outbound mobile marketing campaign. Previously, they were using SMS. And right now, they moved a portion of that traffic to RCS. And as you can see on the left, you see how it looks. So instead of just having a text message, you can have a picture message, and you can also have action buttons, you can click on buttons if you want the user to do anything. On the bottom right, you see the increase in the performance indicators. So they had a 9% increase in the average basket size of consumers actually responding and buying something from these messages, and they had a 4% increase in revenue. And this is only by moving from SMS to RCS. So as you can see, pretty much any outbound campaign, you will have a significant uptake in your conversion rate to whatever key business KPI that you have. And that's the power of this market. All right. Let's move to Slide #7, please. So playbook for profitable growth. We play in 2 different areas. Our main area, #1 area is the connectivity. This is making it possible to send a text message, making it possible to send in WhatsApp or Apple business chat or RCS or WeChat message or Facebook or Viber or KakaoTalk, there's a lot of these new channels, making it possible to deliver that message. It is connecting the voice call from your ride-hailing -- from you to your ride-hailing company. And it is connecting the video call to your doctor online. That's kind of the connection piece, making sure you can communicate. That's the largest part of our business. And then what we call the SaaS services, or value-add on top, is basically where we add something like Chatlayer, not only do we deliver the message because what happens is enterprises then get responses from computers -- from consumers. And then they ask us, well, can you interpret the intent of the responses of these consumers? Basically, either they have to channel all these responses into the care center and pay $5 per response or they can automate understanding the intent of what the user wants. And with Chatlayer, we can automate understanding the intent. So we would tell the enterprise. "a message came in, here is the message, and this consumer wants to rebook his ticket or this consumer wants to cancel his appointment." So we would tell them that and, in that case, they can actually automate the entire chain and reduce their cost. So that's one example of the software-as-a-service on top. But there are very large amount of those type of services, that enterprises now demand when they go into the next-generation services. Right. Operator, Slide 8, please. So we made quite a few acquisitions, as you know. And so the latest ones are SAP and ACL, which are now closed. So we're happy to announce that. And then Wavy, where we're still working on closing it with the regulatory authorities in Brazil. And we do this in 2 different areas. We do it in scale and profitability and technology and go-to-market. Scale and profitability is larger, typically getting market access, getting access to operator to get access to the large country and a large number of customers. But technology and go-to-market is where we talked about Chatlayer and myElefant, where it's a technology proven with customers in one country that we want to scale globally. And that's what's happening with Chatlayer and myElefant the vehicle right now. We're taking those and we're selling them through our entire distribution network of all these other -- the entire distribution network of Sinch. So operator, Slide 9, please. And I do not intend to go through this slide, but I want to have it in the deck in order for you to have it as a reference slide. But the deal rationale of ACL is very simple. Now India is the world's second largest mobile market, 1.3 billion population. And we get access to that market, 500 large enterprise companies, including the majority of India's privately owned banks. And it's a highly profitable company where we'd make an accretive acquisition. We think that's very, very good for our shareholders. Operator, next slide, please. So the next one is SAP Digital Interconnect. You saw the numbers before. It's a major step-up for us, both on the gross profit and EBITDA level. SDI is present in -- with the majority of their revenue in the U.S., Europe, and APAC. This is 1,500 enterprise customers, some of the world's most valued brands. It truly diversifies our customer base. It's also a highly accretive deal, and it fits the profit scale and profitability category. So I think both of those acquisitions, we're very happy with, and we think they significantly strengthen our position in the market. All right. Let's move on to next slide, please. So in the quarter, we launched the conversation API, we're now on Slide 11. And this is a way to -- via one API or one Access point access all channels. So as an enterprise, you don't have to make one connection for -- two for SMS, one for WhatsApp, one for RCS, et cetera. You can make one connection, and you can use all different channels. And we would then help enterprises to select the channel that is best and best fit consumers' needs. This is a major launch for us, and it is moving us squarely into the omnichannel or multichannel land. And we call it Conversation API because it also enables consumers or enterprises to have an easy way of handling true multi -- or true conversations with their consumers. If we look at Slide #12, operator, this is just an example of how it looks. We are -- if you look at the text message to the left, it's a text only. If you look at RCS message next to the left, you see it's a -- you have a picture, but you also have action buttons on the bottom. If you look at a WhatsApp message, you have the pictures, you have a couple of links, et cetera. If you look at a Facebook messenger message, you have the picture, but you have a text and then you have a couple of action buttons. And the Viber message looks pretty similar. And I think you can all agree on the attractiveness for a consumer of any of the most right-hand messages is more attractive than the left most. And therefore, the conversion rates to whatever key goal they had with this message is likely to increase, and that's basically what our data is showing us. We are also then helping enterprises to render or display these messages across different channels. So they can tell us, this is what I want to send, and we will help them via our technology to format the message in the optimal way across the different channels. And that's obviously a great value-added service for enterprises because this gets pretty complex when you're trying to communicate with consumers around the world across multiple formats. So that's one of the benefits of Conversation API. This picture, I think, shows very clearly, I mean, just the difference between the different channels and the power to reach commercial rates. All right. Operator, Slide 13, please. So July to September, gross profit up 40% to SEK 480 million or SEK 481 million. And adjusted EBITDA rising 53% to SEK 226 million, in previous quarter, SEK 147 million. Adjusted EBIT, excluding acquisition-related amortization was SEK 210.7 million compared to SEK 137 million (sic) [ SEK 131.5 million ]. And profit after tax then including acquisition-related amortization being SEK 91 million (sic) [ SEK 96.4 million ], but that's non-cash flow impacting. Organic gross profit growth was 24% in local currency, so without currency effects. You see the COVID-19 causing a reduced voice traffic and lengthened side sale cycle, but the main business is doing well. So you have an impact on some segments, but -- a negative impact on some segments and a positive on others. So therefore, we kind of net-net probably even. And you see that we have seen high scalability, and meaning that EBITDA grows faster than gross profit despite us increasing OpEx to handle greater business volumes, and strengthen go-to-market and develop new products. Operator, Slide 14, please. So key growth drivers in this quarter has been, I mean, continued volume growth with the U.S. big tech companies. It is the general trend of businesses increasing their use of text messaging and messaging in addition to email. That's a trend that has been going on for the last 30 years, and I think it will continue to go on for the foreseeable future. And then obviously, the acquisition of TWW, myElefant, Chatlayer and ACL Mobile impacting in this quarter. Four investment areas. It's organic growth, operational efficiency, new technology, integration. And that's our 4 main topics. I won't go into detail. But organic growth, obviously, being very, very important to us. Operational efficiency, given the number of volumes we do, 107 billion transactions. That is, what is it, 15 or 13 transactions per mobile phone on the planet every year. So every year, we touch every single phone on the planet 10 to 15x, basically. Obviously, there's a lot of operational efficiency. We can do that and automate our tools and drive more COGS efficiency. New technology, investing in the Conversation API and new channels and additional software. I think that's relatively apparent for you when you look at the differences in what you can actually get from a consumer conversion rate perspective. And then obviously, we take quite a bit of cost right now for integrating these companies. So you see that below our adjusted EBITDA in integration costs in order to be transparent for you what the integration costs are. Slide 16, please, operator. And we have strong growth in messaging. Total gross profit growth of 57% with organic at 35%. So you see messaging segment growing the fastest for us driven by U.S. tech and myElefant and TWW are included since mid-October, Chatlayer since April and ACL since September. We're obviously getting tougher comparable figures heading into 2021, given the very strong growth we had in the couple of quarters -- the couple of last quarters. So we ask you to be mindful of that, even though we were obviously continuing to push hard on the growth area, but comparables are obviously getting tougher when you've done this type of growth hike. Right. Operator, Slide 17, please. This is an interesting slide. As you can see the last quarter, when we include the message volume ACL, we do a true step change. Yes, nominal figures at 265% year-on-year growth in transactions in Q3 with 19% growth in comparable units. SAP will add further volume for first of November, and then growth from existing customers and new customers and new use cases. But mind you, there's a very large jump from ACL. It is important to remember, it's a very, very large country. That is why we were interested in making decision, which -- in acquisitions, huge volume. But obviously at a lower gross profit per transaction, but that's something that also will continue to grow both as the economy in India grows, but also after mobile penetration growth. So there's both a growth in the economy and, therefore, hopefully then in gross profit per transaction, but also a penetration growth rate in India, which we think is very attractive to be in such a market. All right, operator, Slide 18, please. And on -- you can see a consistent effect on the gross profit and OpEx per transaction, and this is very interesting, of course. Obviously, you will have a drop in gross profit per transaction when you move into this type of market with such a high volume. So you see the drop at the tail end there. You have a little bit of a downturn before, but I think that's within the trend line on the gross profit per transactions. So the major thing here is from ACL. And then you see on the OpEx per transaction truly going down as well, which is a very interesting concept, and that's another reason why we did this. I mean truly establishing ourselves as with a low cost base, being able to play the true local game as this market becomes increasingly competitive, having a base in India where you can run operations, you can run -- development centers where you still own. You can run a lot of functions there at a much lower cost than the Western countries. That's another very strategic thing that we have done, and that we're looking forward to exploit fully. Operator, Slide 19, please. If you see the margin in messaging, and we measure that as messaging EBITDA per gross profit. This includes both the text messaging and the new messaging formats. As you've seen, we had a good growth of that, showing the true scalability on the messaging business. This is a very highly scalable business. We're dropping in the last months here, more than 50% of each gross profit dollars that we make. We dropped down to EBITDA in messaging. And I think the trend of this curve is obviously very, very strong. Revenue and gross margin depend on the mix on the terminating market. And then the EBITDA gross profit shows margin excluding mobile operating charges. And you can really see how adding traffic volume increases gross profit more than increases OpEx. And this is the scalability in our business. When you get to the scale, then you have -- and you run it like we're doing, then you have a truly scalable business model. But then we're obviously now doing continued OpEx investments to capture growth. And there are some positive timing effects here, it's hard to pay currency reducing OpEx in Q3. So this trend -- this will look a little bit up and down. But I think in general, we are performing very well of this trend over the last quarters and years. If you look at voice and video, you see what we have been talking about, a sharp decrease in demand in Q2 as a number masking from ride-hailing customers with -- as COVID-19 reduces traveling. You see an improvement, which continued into Q3, but you see improvement at the end of the quarter. And so -- especially the last month, we saw an improvement, which is great. On the other hand, it's uncertain future due to renewed lockdowns. And obviously, with lockdown, it's less ride-hailing traffic. But I think through investors say, yes, when there is a lockdown, when there is traffic, we will have significantly reduced traffic. We're also seeing it's coming back when the lockdowns are going away. But now let's see what's going to happen with the renewed lockdowns. Then it may increase going forward. And I think your estimate is as good as ours there. But we have positive underlying trends in the other part of this, which is number of verifications. So it's not all ride-hailing. So around about 50% of this is ride-hailing, then other 50% is number verification, where we see a positive trend underlying. And last slide for me, the recovery in operators, so we do see a return to profitability, partly driven by currency headwind -- by reduced currency headwind. We do see lengthened sales cycles with operators and slower investment due to COVID-19. We're also investing quite a bit here due to the 5G messaging products sold together with Ericsson, and we see a positive customer feedback on that. All right. Operator, next slide, please, and I hand over to Roshan Saldanha.

Thank you, Oscar, and good afternoon, everybody. Glad to be able to present some comments on the financials for Sinch in this quarter. And our scalable cloud platform continues to enable delivery of digitized customer experience journeys. On Page 23, if you turn to Page 23, you see the consolidated net sales, which grew by 46% in the quarter to SEK 1.778 billion. The growth rate in the quarter was positively affected by the acquisitions of TWW, Chatlayer, myElefant and ACL. The organic growth rate of net sales in local currency was 35%. We see a strong continued development of adjusted EBITDA per share, which was SEK 3.65 for the quarter versus SEK 2.73 same period last year. On a running 12-month basis, adjusted EBITDA per share increased to SEK 13.53. For the messaging segment, adjusted EBITDA was a record high at SEK 246 million for the quarter versus SEK 135 million last year same period and SEK 214 million in the previous quarter. The EBIT came in at SEK 155 million versus SEK 87 million in the same period previous year. Acquisition-related amortization, which does not affect cash flow, was SEK 44 million in the quarter. And this amortization relates mainly to planned amortization of acquired brand, customer and operator relationships as well as software. So if you exclude this, when we look at a measure called adjusted EBIT, adjusted EBIT was SEK 211 million for the quarter against SEK 132 million last year. Operator, please turn to Page 24. Here, we see a bridge explaining our underlying gross profit development. A significant part of our revenues are passed on as cost of goods sold to mobile operators. And hence, we tend to focus on lost profit in our internal target setting and measurement versus revenues, and that's how we steer our business. Changes in our gross margin often times reflect changes in geographical mix rather than underlying performance. Over time, of course, we aim to improve gross margins through delivering additional value-added components to our customers. Consolidated gross profit rose by 40% during the quarter to SEK 481 million versus SEK 344 million in the same period last year. Negative exchange rate movements reduced growth by SEK 16 million or 5%. The acquired companies, TWW, ACL, Chatlayer and myElefant contributed 21% or SEK 72 million of this increase. And then organic growth in gross profit in local currency and comparable units was at 24%. Gross profit growth was by far the strongest in the messaging segment at 57%, in line with recent quarters, of which organic growth in local currency was 35%. And adjusted EBITDA over gross profit came in at a record 58% for the quarter as we benefited both from increased sales -- scale, but also from a somewhat more cautious approach to increasing costs earlier in the year in the light of COVID-19. As we will see, we are continuing to invest in the business as we see that COVID-19 has not hit our messaging business negatively. Gross profit declined by 54% in the voice and video segment and 5% in the operator segment, both affected by muted demand due to the ongoing pandemic and related economic development. Operator, please turn to Page 25, where you will see a summary of the number of resources at Sinch. We continue to invest for continued growth. And the main areas of resource addition, as Oscar referred to, are driving internal operational efficiency and quality, increasing our sales and marketing efforts as well as investment, both in new technology and in integration of acquired companies. Our headcount is distributed in many different locations across the globe. And definitely, the diversity is increasing with the acquired companies, but the majority of resources are still in Sweden, with USA, Poland and U.K. being other locations. We're happy that 288 employees from ACL Mobile have joined us during the quarter. And as we close SAP Digital Interconnect transaction, after the quarter, 322 employees have joined us from the first of November. In addition, we see that the Sinch head count during the quarter has grown by around 50. The numbers you see on this page, of course, are quarterly averages. A lot of the work that is being done to support our gross profit growth in the current periods and also investments in conversational messaging, using channels such as WhatsApp. For example, you saw the launch of the Conversation API, which also Oscar referred to. These investments are taken mostly as OpEx through our income statement, and we have very limited capitalization of resource costs, which we believe to be prudent. Turning to Page 26. You will find a bridge from adjusted EBITDA to cash flow before changes in working capital. As we informed with the Q2 report, there's a timing effect in paid tax in the United States, which we see now in Q2, Q3 has higher paid tax. In the quarter, we have also significant acquisition costs related to the announced transactions of SDI and ACL. Despite this, we see a strong cash flow generation from operations of SEK 145 million or 64% in relation to adjusted EBITDA. Please turn to Page 27 for the cash flow statement. Here, you see cash flow from operating activities was SEK 107 million due to seasonal swings in working capital. Changes in working capital, of course, fluctuates from quarter-to-quarter. But I think overall, we're happy with -- as we continue to grow the business that we're able to manage working capital in a good way. Many of our customers, of course, try to maximize the liquidity, especially at quarter end, and this can affect us from quarter-to-quarter. On Page 28, I would like to summarize the status of our ongoing acquisition and integration processes. I'm incredibly excited today to, again, say that we have closed the acquisition of SAP Digital Interconnect, and therefore, can move it to the integration execution phase. For Wavy, we continue to go through the regulatory approval process, and we continue to be confident that this transaction will be approved. As usual, with regulatory processes, there might be small delays which might occur in comparison with our original time plan, but we still expect to close it during Q4. For the integration phase, our focus remains on commercial execution, on the launch of new products and services and cross-fertilization across our customer bases, technical integration. And finally, of course, other functional integration. It has been great to see already in this quarter, contributions of SEK 71 million in gross profit from the acquired companies, but also we see other cross-sales successes, such as signing the first Chatlayer customer in India. Turning to Page 29. Adjusted EBITDA per share grew 51% in Q3 2020, measured on a rolling 12-month basis. Sinch has a positive cash generation, and we had a positive cash position at the end of the quarter with SEK 970 million. Net debt-to-EBITDA was at negative 1.2x. The financial targets for the company are unchanged from what we have previously stated, where we aim to grow adjusted EBITDA per share by 20% per year and maintain net debt below 2.5x adjusted EBITDA over time. Please turn to Page 30. On Page 30, we summarize our financial leverage pro forma upon closing the announced acquisitions. As at Q3, if we closed -- the not yet -- the outstanding acquisitions of SDI and Wavy, then we would have had a net debt to adjusted EBITDA of 1.8. We believe that our underlying business performance will enable a timely deleveraging. And we're happy to report that at the end of Q3, our pro forma leverage is already below our financial targets. And we look forward to the future. With that said, I'd like to hand back over to Oscar to summarize today's presentation.

Thank you, Roshan. So key part of this, I mean, continued growth with U.S. based global tech companies, great customer base, of course, we should continue -- try to continue to grow with them. For initiatives for broadening our growth, we work hard on that, and we see good positive early signs across the base. New customer wins in next-gen messaging through Sinch Conversation API, we see this market is really running, and we see great early stage demand even after the first day of launch. The closing of pending transactions, obviously again, are very key. Working with Wavy, we were successful in SDI. We hope to close Wavy, but then you know you've got to be in this type of acquisitions. When you do a lot of them, you -- there are always risks for delays. And we’re aware of that, and that's the game we play. But we continue to be positive on all the acquisitions we've done. Nothing has changed in our belief in probability of closing them. But obviously, technical and commercial integration of SAP Digital Interconnect and the other acquisitions we've made is a very large focus area. And we continue to strengthen our connectivity offering, focusing hard on that. That's where we are probably the largest in the world, but also investing in the SaaS products for advanced next-generation messaging. With that said, I would like to conclude the presentation, and hand back to Thomas, and operator for any questions. Thank you for listening.

[Operator Instructions] And our first question comes from the line of Predrag Savinovic of Carnegie.

This is my first question. I'm wondering a bit on your U.S. revenue opportunity here. So the U.S., it’s 54% of total messaging revenue in the quarter, and judging by the gross margin, it seems to be mainly nondomestic traffic and the growth area for the U.S. seems to be over 100%. So this is clearly, clearly impressive, but I can't help wonder what can you do to get more domestic traffic? Or do you see this happening in that case when and why?

So it is not only -- we have a very large domestic U.S. business. We are -- if we're #2 or #3 but in that area, in the domestic U.S. market. I just want to be very clear. We have a very strong standing in messaging in the U.S. for the stock. So we have a large and significant domestic U.S. business. We're also good at international. If we stick out anything, it's high-quality international delivery because that's harder and less competitors that can actually do that because in each region, U.S. being one region or Europe, you have a couple of local regionals who can compete in that, but fewer of the competitors can actually do high-quality [ in cash ] delivery. So that's where maybe it's only us and 2 other companies who can do it for the really biggest customers. So we see growth in both of those 2 areas, and I want to be very, very clear that we have a large and solid U.S. domestic business as well. Yes. Did that answer your question? Or would you -- or did you have a follow-up on that specific one?

No. No. That's very clear. I'll take my second question then, which is one of your competitors, Twilio, with their recent investments and acquisitions, they will now be competing to what seems to be some of your key customers within the U.S. big tech. And given this move, competing with some of the major platform owners, could this imply that your relations with some of your largest companies will strengthen even further?

Yes. And first, you'd have to ask them. But we obviously ask them. But here you see a little bit of the difference in strategy in between the companies, basically. We believe in a very partner-oriented go-to-market approach. And the basics are we -- our enterprises should reach 100% for the consumers in the world. That means millions of enterprises, and there is no way that any single company will be able to sell all of those enterprises directly, in our view. That said, we believe that using partners to reach them, but maybe the cloud platforms, which I assume you're alluding to, Salesforce, Oracle, Adobe, Selligent. I mean -- there's a lot of them. That's one group, but it's also like local ASPs -- like local ASPs or application service providers in the local market, but it also includes SIs and creatives. So System Integrators and creative agencies. We believe that partner go-to-market is very important. And yes, you're right. Some of the moves that Twilio have made puts them in a competitive situation among a couple of these. Flex competing on the call center side and then the latest acquisition of segments may be seen as competitive on more the cloud platform side and the acquisitions of SendGrid on the mail side may -- is obviously competitive to the mail people, but it may also be to our side. But that's a -- we have a partner-oriented approach. And then how the customers react, we'll have to see in the coming quarters.

And our next question comes from the line of Daniel Djurberg of Handelsbanken.

And congratulations on really strong messaging growth. I have a question first on your new Sinch Conversation API. Can you comment with us a little bit more on your go-to-market strategy? And also the unique selling points you have here versus competitors. For example, Twilio is your rich rendering better or in par with the messaging orchestration they have. Start with that one?

Yes. It's a good question. Go-to-market is in one way, in the simplest form, relatively similar to text, if you sell an API with more channels. I mean if you sell a text messaging API or you sell an API with more channels. That's an API-based sales of messaging connectivity, which is pretty similar. Now when you go into conversation API, what happens is enterprises typically want more software on top. So they would typically want like Chatlayer on top because consumers start to respond and then you need to have an automated response engine or they want a -- more software to create the messages. Then it becomes a more value-added kind of market model. So there, you need a different type of sales force, who are a more value-based sale than you had in the classic or CLX days, if you will. So that is changing our go-to-market model. So in one way, it’s similar, in one way it's different. And that's a transformation we're going through. And believe me, it's very exciting, but it's not easy. Your second question, I now forgot. Could you please repeat that?

It was a little bit on the competition for example, you have the rich rendering where some -- your competitors have this orchestration offering, if it's similar or unique selling points was another question.

Yes. So we believe our USPs are, it's hard to say because the market is so similar. So it hasn't really ironed out -- or so early because it hasn't really ironed out yet. But one is the number of channels, we're going for having the broadest channel selection. Number two is personalization, using the assets from Vehicle and a couple of other technologies, so really making the messages personal to the consumer is one key thing. And second one is our core USP in all the company, which is the service quality, uptime service quality. And the third one would be looking into the data side and looking at how can we actually help companies to improve the conversion rates. So that's a couple of the USPs we're targeting, but this is customer-driven development. You need to work closely with the customers and realize what do they need, what can we do, and that's going to be developed over the coming quarters, but it’s kind of directionally where we're going.