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

Welcome to the Sinch AB end of year report, January to December 2020. [Operator Instructions] Just to remind you, this conference call is being recorded. Today, I'm pleased to present Thomas Heath, Chief Strategy Officer and Head of Investor Relations. Please begin your meeting.

Thank you, operator, and welcome, everyone, to this Q4 presentation with Sinch. We're very glad to have you listen in and hear our story. With me on the call today, I have our CEO, Oscar Werner; and our CFO, Roshan Saldanha. Before we start a few housekeeping rules. This call is primarily for analysts and investors. So other participants are, of course, free to listen in. But for questions, you can contact us directly. And when we get to Q&A, I would like to ask everyone to restrain themselves to 2 questions each. Then you're happy to join the queue again, but we'll have 2 questions each to start with, and that will ensure that everyone gets to ask questions. So with those first remarks, I'll hand the word over to our CEO, Oscar.

Thank you, Thomas. So welcome, everybody, and thanks for your interest in Sinch. So without further ado, this is the Q4 investor presentation. So let's go to Slide #2, please, operator. And -- so this slide, the ones who have been with us for a while, have seen a couple of times. So past trailing 12 months revenue, SEK 8 billion. Adjusted EBITDA SEK 912 million. We are 2,083 people, including Wavy. So all the figures -- so the 3 figures that includes Wavy, and that is the people, the countries and the engagement and all the financials, obviously, since Q4 is excluding Wavy. But 2,000 people with Wavy, 47 countries with Wavy. And 145 billion engagements per year with Wavy. So as you see, we have quite good progress on these 3 key metrics. We do customer engagement through mobile technology. So any enterprise they want to engage with their consumers via the mobile channel, we help that we do that via a global CPaaS platform and that provides messaging services, voice services and video services. To put it simple, if you or an enterprise want to have a video call with one of your consumers, then we provide the technology to connect that video call and to make it possible to -- for you to run with high quality. If you're an enterprise, who wants to have a voice call, maybe from your app with your consumers, then we provide a communication technology to connect -- to connect that call. Or if you're a company that wants to provide an RCS or a WhatsApp or a Viber or an SMS message, we would provide a CPaaS platform in order to send that message. We serve 8 out of 10 largest U.S. tech companies. That's one of our larger customer groups, very powerful companies. And we have been growing well with that to do to our focus on high-quality international global service delivery. I used to say always that this -- what fascinates me and it still fascinates me with this market, it's that you've got 100% consumer penetration, are yet to meet 1 single person since I joined the company who is not a user. I know that you all have used the video service and all the voice service from the web or used a -- or receive text messaging -- text messages from your bank or something. This is a large growing multi-billion dollar -- multibillion U.S. dollar markets. We have a very high profit focus. We've been profitable since our foundation in 2008, and we continue to run this company on profit, and we think that's a very good run to -- a very good way to run a business. All right. Operator, next slide, please. Track record of profitable growth. This is showing our gross profit growth. We focus on gross profit since pass-through revenues between geographies is so vary -- it's varying so much. And so in Germany, you may have a 10% growth margin; in U.S., you may have a 50%. So therefore, focusing on revenue in this business would be distorting. So this shows our gross profit trajectory and our adjusted EBITDA trajectory. As you've seen, we have solid growth over the years. And you see, we do a true growth spurt here at the end with the larger acquisitions we made. So you see both the impact on gross profit and adjusted EBITDA of Wavy, SDI, ACL and also Inteliquent. And as you can see, the largest of them all is in telecom. So that's a major piece to our growth. And this is obviously looking on a pro forma basis. We did 81% gross profit growth and 63% gross EBITDA growth in Q4, and we're going to break that down, organic and M&A driven a little later. And acquisitions of Wavy, SDI, ACL, and Inteliquent is adding significantly to our scale and profitability. I should also say comparing between product lines, if you compare like the voice business now, which is becoming forward-looking large to us and text messaging, they also have a different gross margin -- gross profit profile. So again, looking at gross profit in a mix between geographies and the product lines would be misleading. Operator, next slide, please. Growth markets. So we are in a very good spot. Our market is growing fast. And up until to date, before the Inteliquent acquisition, messaging has been our largest segment. Messaging is comprised of 2 parts: One is text messaging or ADP SMS. That's an -- we see that as an $18 billion, $20 billion market runabout. We take the lower end of the market estimates here on a global basis, highly scalable, highly profitable. And then it's combined with an OTT market, which is going to RCS, WhatsApp, Line, Viber, Caltalk, WeChat, et cetera, which has plus 100% growth rates in the market. It's like it is base, highly profitable, highly scalable, combined with the high-growth add on top markets. And we've got the CPaaS in -- which is on top of messaging and voice, adding software-as-a-service components charged at typically an 80%, 90% gross margin profile, and that market is growing at a 30% CAGR per year. So you got also within messaging, but also software-as-a-Service on top, you've got a very interesting growth profile of adding additional software. To this slide, we obviously now need to add the voice business or from when we close intelligence -- Inteliquent. So that's a large portion of the market, of course. Operator, next slide, please. So this is how we're basically seeing on the messaging side, creating value for businesses. I mean the market started many, many years ago of emails. And then enterprises figured out that, hey, if I want high open rate and high response rates, text is a better way to reach every person on the planet in a time-critical manner in a manner, so they figure out the text is a complementary channel to e-mail because it's got much higher read rate and a much, much higher open rate. Now what's happening is enterprises are figuring out that, hey, next-gen messaging, like sending WhatsApp message, sending a WeChat message has combines the immediacy and open rate and read rate of text with the ability to send an app like experience. Because the main limitation of a text, this is 160 characters only, and now we can in principle, send it to your inbox an app like experience. And as you can imagine, that just like expands the number of used cases you can do via a messaging, which we think will greatly expand the addressable market. All right. Operator, next slide, please. So as a response to this, we have launched a multiproduct, 1 Sinch Conversation API, which is 1 API covering all the messaging channels in the market. So you connect once and then you can send messages via the channels in the markets. And you also expand the feature set of -- that is needed for these next-generation messages. And so what you're basically seeing here is like 1 API, being able to communicate via many channels and then enterprises being able to increase the engagement with their consumers because suddenly, they can have the immediacy of text combined with an app like experience with action buttons and pictures and videos and better reporting statistics and the carousels. And so combining the immediacy of text with an app like experience drives a whole lot of adoption, and that's what we're seeing by Sinch Conversation API. If you go to next slide, please, operator, that's #7. Just to visualize this, you can see here is the same message sent via 5 different channels, SMS, RCS, WhatsApp, Messenger and Viber. And you can see the difference in consumer experience by just by visual inspection here. Looking at the pictures. And if you look at the RCS message, look at the picture, then you got it on text, and then you got some action buttons. And you can basically then generate the call to action that you want from the consumer via clicking those action buttons, which greatly increases conversion. All right. Operator, go to Slide 8, please. We're very happy to announce that we are -- have entered into a partner with Salesforce, and we and Salesforce are providing next-generation methods to Salesforce customers using Salesforce Marketing Cloud. So basically, Salesforce wants to do WhatsApp enabled their marketing cloud. They came to Sinch. We did a joint development project we have integrated the Sinch Conversation API and our WhatsApp channel into the back end of Salesforce. You can now go into Salesforce marketing cloud, create the customer journey, click on, I want to send it via WhatsApp, and then it would kind of create that story, and then the messing will go via Sinch channels. This native integration in the Salesforce marketing cloud journey builder is, I think, a very, very powerful tool to enterprises, and it shows how we work with partners in this ecosystem. This is available from 16th of February. If you want more in from this, I urge you to watch the product being demo on this presentation that you see on the link below. All right, Slide 9. Another example is iFood coming in from Wavy, just showing some use cases there. iFood is the largest food delivery app in Latin America. And they have a challenge to handle the customer service via the riders and the customer care centers. So they're struggling to handle that volume. So what they did was we delivered a solution to registered new drivers. So when a new driver wants to register, think about -- it's like an Uber driver, but in this case, iFood, a new driver, want to register, they can do that via a bot. You can onboard restaurants. So basically, think about the restaurant owner, where the WhatsApp messaging, hey, our data suggests that your restaurants would benefit from being in our -- benefit from being in our service. Do you want to register, in that case, respond. So -- and then they register the restaurants via WhatsApp and then you measure NPS. This has resulted in a 70% of reduction in service delivery cost in the support to the drivers. So this is not consumer facing, this is the driver facing. 1.5 million conversations per year and 44% -- 44.6% of the requests from the drivers to the customer care is handled by the bot. So you can automate a large portion of the driver requests here. Wavy has here been using Chatlayer in order to use their technology. They did it first on another technology, but then they had integrated Chatlayer since it's a better text. So here, you can see kind of the combination of our various acquisitions, like Chatlayer having NLP, our goal is to scale them globally, Wavy, then using that type of service in order to deliver to the largest customers in Brazil. All right. Next slide, please, so Slide 10. So we have a playbook for profitable growth. We do that in connectivity and software-as-a-service. We're focused both on the connectivity layer. This is making the voice call, connecting the video call or sending message and ensuring that is high-quality and delivered with no latency, et cetera. And then we add on top the Software-as-a-Service, that may be the AI, MLP services, like I talked about Chatlayer, which is basically saying, okay, we placed a voice call here, do you also make this customer want to know what the customer -- what the consumers sell to you, we can then interpret the intent for you. That's obviously an additional charge. So either you can just like place a voice call or you can have this interpret the intent of the consumers to say the intent of this consumer is to speak this customer service rep or to cancel the contract. And that's obviously an additional service, which we charge for on a SaaS-based metric like a monthly fee or a monthly active user fee, typically having a traditional SaaS style metric -- SaaS style profile, which is 80%, 90% gross margin. So connectivity and Software-as-a-Service, and we're gradually growing both the connectivity base and the software -- the SaaS services that we add on top. So operator, next slide, please. So strategic acquisitions. We have done few. We do them in 2 categories. As you see to the left, it's technology and go-to-market and scale and profitability. So technology and go-to-market we acquire companies that are -- add a technical component that we want to scale globally, like we did with Vehicle, myElefant, Chatlayer and also part of Wavy base like that, and I gave you the Chatlayer example before. Scale and profitability, that's when we enter a market like we did with Wavy or ACL in India, or SAP, we scaled up our European and American business. In telecom, there's also a scale and profitability acquisition, but it's into a new segment, which is voice, but Inteliquent is essentially a voice connectivity provider. They don't have a lot of SaaS services. So the way we think here is we get a good base. We sell to almost all the largest companies -- voice customers in the U.S. that gives us a way to upsell them in stage 2 with all the SaaS services that we are developing in other entities, but it gives you a very good scale and profitability, and it gives us access to a lot of customers that we then can upsell with other services. All right. Slide 12, please. So we went through this yesterday, but for those of you who weren't -- who were not on the call, a short recap. So Inteliquent is the largest independent voice communication provider in the U.S. So they do 300 billion voice minutes per year and have had 100 million active phone numbers in their system. That means roughly 10% of all the phone numbers in the U.S., around 600 employees, including contractors, headquartered in Chicago. We think this is a very logical acquisition. Voice is a large portion of the CPaaS market, us being the largest provider in messaging and then adding the largest U.S. voice -- the largest voice connectivity player in the U.S. makes a ton of sense. Because ultimately, what it's about is enterprises want their consumers to both be able to communicate with them via messaging and voice. You can just go to yourselves. Sometimes you can do an e-mail or messaging interaction, but in some case, you want to connect or talk to the rep, and that's when Inteliquent comes in. And having both of those, we can kind of cross collaborate and do good services, including both. So deal rationale, establishing us as a leader in voice communications, ability to sell to the largest U.S. voice customers, and it's a very financially accretive deal, as you can see from the financials. Integration costs estimated to some USD 25 million over 18 months, we will do a lot of cross-sell. We have also said that we will reinvest around about $15 million to $20 million of Inteliquent EBITDA to accelerate the joint CPaaS road map to strengthen the go to market. So this is basically saying the every voice on activity player you need more services on top in order to address in a more automated way and in a more programmable way enterprises. We will take a -- or a portion of their EBITDA in order to invest in that area. And the reason is very straightforward. It's because it increases the growth. We have seen a peer do this that is Bandwidth in the market, and you can see that their growth has increased significantly by doing this investment, and we're doing a similar thing here. This is, by the way, also very similar to what we did on the messaging side. We were SMS provider and added a lot of things and then growing faster. So this is known territory to us and we're applying same tactics. Enterprise value was $1.14 billion. Closing is subject to regulatory approval and expected H2. Obviously, we're not in the -- they are in voice, we're in messaging. So it's -- and by competition, but we're actually in 2 different markets. So we would assume the risk would be low on that side. Then there is a regulatory approval for operator licenses in various U.S. states, which will take some time. It will take 6 to 9 months or something like that in order to run through. We reported revenue of USD 500 million, gross profit, USD 256 million and EBITDA of USD 135 million. That is including a COVID effect. And if you take away that COVID -- positive COVID effect, we would assume that the run rate EBITDA is approximately USD 112 million. Okay. Let's go on to the next slide, please. Then coming into Q4. So we had a gross profit rising of 81% to SEK 796 million. Adjusted EBITDA rising 63% to SEK 325.7 million. Adjusted EBIT, excluding acquisition-related amortization is SEK 303 million. And if you have the acquisition-related amortization, EBIT or profit after tax obviously comes significantly less, but that's non-cash flow impacting. Organic gross profit grew with 37% in local currency. So very strong organic growth quarter-to-quarter in Q4. COVID causing reduced voice traffic and lengthened size cycle. We also investing, as you know, relatively stronger to handle greater business volumes and strengthen our go-to-market and new product offerings. And operator, next slide, please. So growth drivers, we have continued to see good growing growth with our U.S. big tech companies. We're seeing a groundswell broad growth businesses increasing their use of text messaging in addition to email. And also new channels coming on board, but since the text messaging market is so large, that's still a large share. But in the more advanced markets like Brazil, the kind of the OTT or volumes are becoming a significant part of the business. We're also seeing the acquisitions of SDI, TWW and Wavy and ACL Mobile now driving growth. And we're growing both with new and existing customers. All right. Operator, next slide, please. The 4 investment areas: organic growth, continuing to support that, how do we continue to build the machine to drive organic growth. It's very, very important to us to have this two-pronged strategy, where we focus hard on organic growth because that's our own machine, right? So that's -- we focus a lot on that, and we see good momentum and things happening in that area and improving there. We focus on operational efficiency, which is both COGS and automation and client self-service tool. With the scale we have, obviously, you can have -- we can extract a lot of operational efficiency. So that's another big area. New technology, things like Conversation API, WhatsApp, RCS, et cetera, is a big focus area. And then obviously, integration. We have the philosophy of really spending to integration to get the companies together and drive this in or to drive this as a unified entity. There's obviously a lot of work. It's hard. It's messy, but that's an area that we think we're good at, and we drive hard. Operator, next slide, please. Here you see the strong growth in the messaging on the gross profit and EBITDA level and how that's developing in Q4. Total gross profit growth of 84% with organic at 47%. SDI contributing from 1st of November and Wavy from 1st of February 2021. You see strong performance in December. And you see, obviously, we got tougher comparable comps heading into 2021. And we had a great growth spurt for quite a years and the comps are obviously getting higher. We will fight on absolutely as much as we are, but it's important to understand the comp levels, of course. And operator, Slide #17, please? Rising message volumes. So we see the number of transactions per month, how that is having a very interesting development. Obviously, a very large increase in September with ACL Mobile in India. And you can just realize how powerful the India market is in terms of volume, basically. We had a 354% year-on-year growth in transactions in Q4, 44% growth in comparable units. Wavy will add further volume from 1st of February. And again, we're growing with existing and new customers and new use cases. All right. Let's go to Slide #18. So here, you can see the OpEx per transaction. We're measuring our kind of our scalability and how we do, both GP per transaction and OpEx per transaction. And you can see the impact of ACL and how that is kind of changing things. And I think per transaction measures relevant to track -- it's relevant to track by different margins since it's different geographies since it's got such a big -- it's obviously such -- so much lower per message GP and OpEx in markets like India. So these graphs becomes a little bit odd when you add different geographies, obviously. But we think this, on overall, these metrics look good. And obviously, the difference in between is the money we can make. All right, 19, please. We're measure EBITDA per gross profit. So you can see that roughly of every gross profit dollar that we make, we drop in the last months here, more than half down to EBITDA. That shows the very large scalability of this business. It shows how profitable we are. And I think very few companies can show that type of metric. You can also see that trend increasing and I think that shows the scalability in this business, that when you add volumes, you can actually go for -- you actually get a better economies of scale. Because you see that adding volume increases gross profit more than increases OpEx basically. Then it's big revenue and gross margin, depends so much on the mix of the terminating markets. But that's something we manage to look at these metrics. But we look at this metric. We think it's a very good scalability metric. All right. Operator, Slide 20, please. We're seeing modest improvement in voice and video. And you had a sharp decrease in demand in number masking from ride hailing due COVID-19, reduce the need for traveling. We do see positive underlying trends in number verification. That is actually not a voice call, but if you do a 2-factor authentication and one verified number, which is not COVID impacted as much. It's more the voice calling business since we're exposed to so much to ride hailing that has taken a big hit. But you see the large hit and then gradually improving from there and working ourselves back to a positive EBITDA in this business. All right. Operator, next slide. We see a good recovery in the operator business. They typically have a good Q4, should be said. So -- and this is a little bit of a lumpy business. So it shouldn't up too much on quarter-to-quarter if you look at the overlying trend. But it's high margins. You see the SDI, person-to-person messaging hub, operating at a lower gross margin. We're also seeing good demand here from the 5G messaging products sold together with Ericsson. So here, we're seeing a using SMS to wake up IoT devices, and we're selling that to operators together with Ericsson, and we see a promising funnel there to the largest operators on the planet. All right, financials. I will now leave over to Roshan.

Thank you, Oscar. Super glad today to present some comments on the financials for Sinch this quarter. Our organic growth is the strongest ever yet on gross profit, growing 37% year-on-year. Operator, please turn to Page 23 for the 1 -- for the income statement. Consolidated net sales grew by 95% in the quarter to nearly SEK 3 billion. The growth rate in the quarter was positively affected by the acquisitions that we've done, Chatlayer, SDI, ACL. The Wavy acquisition was closed in February, and we will be consolidated first in Q1. Also, the SDI acquisition was contributing only for 2 months this quarter since the acquisition was closed in the beginning of November. The organic growth of net sales in local currency, so excluding currency effects, was 43%. Adjusted EBITDA grew by 64% to SEK 326 million from SEK 199 million last year same quarter. And full year EBITDA was at SEK 912 million -- adjusted EBITDA was at SEK 912 million, a growth of 59% year-on-year. We see a strong continued development of diluted adjusted EBITDA per share, which was SEK 5.16 for the quarter versus SEK 3.64 same period last year. On a running 12-month basis, adjusted EBITDA per share increased to SEK 15.1. For the messaging segment, especially adjusted EBITDA was record high at SEK 349 million for the quarter versus SEK 205 million last year and SEK 248 million just the last quarter in Q3. Adjusted EBIT also, which excludes items affecting comparability and amortization of acquisition-related intangible assets because those do not affect cash flow, amounted to SEK 304 million versus SEK 186 million last year same quarter. Operator, please turn to the next page. Page 24, which shows a bridge underlying -- explaining our underlying gross profit development. A significant part of our revenues are passed on as cost of goods sold to mobile operators. We pay them to send messages and place calls, but the rates they charge can vary greatly between markets. And since these passthrough revenues do not contribute to our profits, we focus internally and steer almost exclusively on gross profit. Changes in our gross margin very often reflect more changes in geographical mix rather than underlying performance or competitiveness. Over time, we aim to, of course, improve gross margins by delivering additional value-add components to customers. Now turning to the numbers. Consolidated gross profit rose by 81% during the quarter to close to SEK 800 million, SEK 796 million and from a base of SEK 440 million a year ago the same quarter. Negative exchange rate movements reduced the growth by SEK 23 million or 5%. The acquired companies, ACL, Chatlayer and SDI contributed 49% of the increase and then the remaining organic growth in gross profit in local currency and comparable units was at 37%. When looking into the segments, gross profit growth in the messaging segment was 84%, of which organic growth in local currency was 47%. Also, adjusted EBITDA over gross profit in the messaging came at -- came in at 52% for the quarter as we continue to benefit from increased scale. Gross profit declined by 34% in the Voice and Video segment, affected by muted demand due to the ongoing pandemic can relate to the economic development. And gross profit in the Operator segment rose by 99%, which is entirely attributable to the consolidation of SDI's hubbing services to operators. Hence, the sort of organic growth in the Operator segment was 0. Please turn to the next page, Page 25, to see a summary of the number of resources at Sinch. We continue to invest, as Oscar showed, for continued growth and main areas of resource addition are, of course, driving operational -- internal operational efficiency and quality, increase our scale -- sales and marketing efforts as well as investment in new technology and the integration of acquired companies. Please note that the figures on this page are all quarterly averages. As we have closed the SDI transaction during the quarter, you can see the effect of that with 480 employee consultants joining us from the first of November, and the remaining is the increase in Sinch headcounts. Due to the nature of the work that is being done to support our gross profit growth with these increased resources, they do not actually contribute to the profit growth in the current period, but rather in future periods. And also, all of the investments in our systems are taken as OpEx and with very limited capitalization of resource costs, which we believe to be prudent. Turning to the next page, Page 26. You will see a reconciliation between adjusted EBITDA and cash flow before changes in working capital, highlighting the important items. In this quarter, we have significant acquisition and integration costs of SEK 146 million related to the announced transactions of SDI and ACL and Wavy. And despite these -- despite this, we see a strong cash flow generation from operations of SEK 155 million or 48% in relation to adjusted EBITDA. On a full year basis, we generated SEK 602 million before changes in operating capital, which is equivalent to 66% of adjusted EBITDA. Please turn to Page 27. Here, you see the cash flow statement. I think the highlights, of course, are the negative change in working capital, which is primarily related to the acquisition of SAP Digital Interconnect and incorporating those balances into our balance sheet. In addition to that, also, we have the cash flow resulting from the issue of shares that we did in November 2020. Please turn to Page 28, which summarizes our integration progress. Of course, on this page you see that we have also included the deal that we signed and announced yesterday of acquiring Inteliquent in the U.S., where we're just starting to work with the regulatory process, and we expect this to close during the second half 2021. Starting from yesterday, essentially, we will start to put together a team that will work on the integration planning together with management from the Inteliquent side. On TWW and Wavy, there is -- Wavy we closed in February 2020. We're, of course, onboarding and consolidating joint teams, aligning sales goals and performing a platform assessment to decide which platforms to keep and how we will evolve them over time. And there are initiatives to scale Wavy's success in the conversational messaging business in Latin America to other parts of the world. Comment on ACL, a deal that we closed in September 2020. There's, of course, activities to onboard the team, to gain from cross-selling our products, both from ACL to other parts of Sinch and vice-versa. Traffic putting outside India and also performing technology assessment. And then on SDI, I think here, the deal was closed in -- the transaction was closed in November 2020. We have successfully onboarded all employees across 19 countries. We have transferred shared functions and are consolidating the shared functions. We're separating the A2P and P2P businesses as well as performing a comprehensive product portfolio review and a future product strategy for what products we will retain and what we will develop then. The key focus on the SAP Digital Interconnect is also, of course, driving commercial execution through common goals and focus. Please turn to Page 29 for a summary of the financial targets. Our targets remain unchanged. Adjusted EBITDA per share to grow 20% per year and net debt over adjusted EBITDA to remain under 2.5x over time. On a rolling 12-month basis, including Q4 2020, we grew adjusted EBITDA per share with 43% in Q4, and net debt over adjusted EBITDA was a positive cash position of 2.2x as at the end of Q4. Please turn to Page 30. Again, for a further -- so some further details around our financial leverage, where we show how the leverage would look like if we had closed all of the announced acquisitions as at the end of Q4 on a pro forma calculation, including the last 12 months of adjusted EBITDA for acquired entities. And here, you see that if we had closed Wavy as at the end of Q4, we would still have a cash position of SEK 1.3 million. And then assuming that we had closed Inteliquent as at the end of Q4, we would have a net debt-to-EBITDA ratio of 3.4. This should be compared with the number that we gave yesterday when we announced the Inteliquent transaction of 3.7, which was based on the Q3 adjusted EBITDA and shows the strong cash flow generation we have in our business and how this ratio -- how we expect this ratio to decline as we come closer to the closing of this transaction. With that being said, I will hand over to Oscar for closing comments.

Last slide. Thank you, Roshan. So continued priorities, obviously, going to continue to grow with U.S.-based global in our tech companies. Strong initiative for broadening growth across the base. We're working hard on that and on broadening the organic growth. Organic growth is super important for us to maintain. New customer wins in next-gen messaging through Sinch Conversation API. That's the major thing in the market, and we're focusing a lot on proliferating that API to most of our customers. Integration of Wavy, TWW, ACL and SDI, obviously being a big, big thing. And then continued strengthening of our connectivity offering, both on the voice and the messaging side. And investment in the SaaS products, the value-added products for advanced next-generation messaging and additional features. That said, thank you. I'm very happy to report a strong result, and thank you for listening, and we open up for any questions you may have.

[Operator Instructions] Our first question is from Predrag Savinovic of Carnegie.

So first question on general market activity and growth going forward. 2020 was very strong, very well executed. And looking ahead, I'm curious to hear what kind of themes you think will drive growth going forward? Is it U.S. tech mainly? Or do you see more broad-based growth from other customers as well. And if more broad-based, what will trigger that change in trajectory?

No, I do think and hope that we will continue to grow with the U.S. tech companies -- U.S. big tech companies so that's a key thing. We do also see that business in increasing uses of SMS and other forms of messaging at a broad scale, is a market trend. And it's also so that we are working hard on increasing our own growth by various being more effective selling more customers, and we see good signs on that, it's both on market growth and increasing our own growth in that area. So that's the second one. And then you obviously have the acquisitions coming online and being reported more into the figures. That's what I would say, the main growth drivers are on a little bit more longer-term basis, I think the introduction of richer messaging channels into the market, the explanation is simple. It moved from 160 characters to an app experience in a message, will that drive market growth? Yes, it will, over a long period of time going forward. And looking forward, looking out if Inteliquent -- or when Inteliquent comes in, the voice market is in the CPaaS segment growing at a 20% rate as well. So that will be an additional growth driver on the CPaaS segment of Inteliquent.

And a follow-up to that, and also what you mentioned in the report in the CEO letter, Oscar, that conversational messaging, next-gen channels are rapidly gaining momentum. If you could elaborate a bit on this, maybe address that into into numbers? Is it somehow driven from, I don't know, WhatsApp, which has opened up the ecosystem more for business now following user agreement changes? What has really this off? And also, what kind of momentum are you seeing?

I think to us, it's important to focus on the phenomenon and not individual channels. So yes, WhatsApp is 1 of the largest channels, but we also see RCS or you see WeChat, if you look at China, it's obviously a massive channel, right? So there's a lot of different channels that enterprises use. MMS, we see growing well as well in the U.S., all technology but enterprises are realizing it now. So it's like it's a plethora of new channels coming on board, which makes messaging go from 160 characters to app-like experience. So that will drive growth. The metrics we're seeing is 100% growth rates -- 100-plus percent growth rates in this area. So then you can figure out, all right? If that portion is growing faster than the rest? Yes, it will going to gradually take up a bigger share. But it will take quite a while before it becomes big, right, because the size of the main business. You see especially rapid growth in Latin America and India on these new channels. That's where the most aggressive growth are the highest penetration in those markets.

Our next question is from Ramil Koria of SEB.

I can take both straightaway. I think first off, perhaps if you could expand a bit on geographical differences in sort of growth rates. For you specifically, but perhaps also from a market perspective, I mean, is it so that if you're not in the U.S., then put very simply you're not relevant or if you could expand a bit on that? And then secondly, circling back to a question you got yesterday about constraining factors on the M&A side, you mentioned integration capacity. Perhaps if you could sort of provide us with a snapshot of where you are on the integration capacity part, but also reasoning a bit on balance sheet constraints here and now?

All right. So geographical growth rates, we see it's a little bit different in different markets. We see the U.S. market become very strong. But then remember, U.S. market is partly U.S. to U.S. enterprises, but then it's also U.S. cloud SaaS ecosystem is so strong. So maybe U.S. companies selling to other parts of the world and are winning market share. So if we sell to, say, Shopify without saying that their customer, they would have -- may have customers in Europe, but the growth in our books looks like it's in U.S. because that would be the customer. So U.S. is very strong. Yes. You see slower growth in Europe, but still solid growth. I think we have -- we, as you know, have had to improve our own performance in the European market. And there, we have been working very, very hard. And I think we see promising early signs there, but that's also -- both the market, but also a little bit of our own performance. Then we see Latin America and India our other 2 big regions. They are growing faster from a just like pure messaging and even text perspective than Europe, and also, I think, faster than the U.S. on alone. In India, you've got like a penetration question and Brazil as well. So your -- those 2 markets are growing at very solid healthy rates in stand alone. Greater APAC also growing very fast. That's a smaller portion of our business, and therefore, you don't see the major impact. Are you relevant if you're not in the U.S.? I think the world is global. I think the U.S. is the most powerful economy, of course. Strengthened by the fact in this particular market, that developed a lot of these SaaS companies. And I think all markets are relevant, but obviously, U.S. being a really real powerhouse. If you want to be a really global player, it is extremely strong to be in the U.S. It's hard to be really global without, but I will not go as far to say that you're not relevant. Consolidation, M&A, yes, the core limiting factor to us, we think it's not the opportunities in the market, it is the ability to integrate. We are increasing our investment there. I have a VP for integration reporting only to me or reporting to me with a dedicated team and building up a dedicated team to do this. She was within the Thomson Reuters [indiscernible]. She was going to participating in that when Thomson Reuters did 40 acquisitions a year. So that's her perspective. We are investing continuously. We're getting better and better, but this is where we have to think about in terms of acquisitions. I think the integration is doing well, but it's obviously a lot of work, and we're working to improve. On the balance sheet side, I would ask Roshan to answer the question.

Yes. I think -- thanks, Oscar. Just a couple of comments there. I think one, Ramil, just as a clarification, the growth figures, I think, from our report is, of course, based on where the customer is based. When you look at the traffic spread, it's a lot broader than that. I think on the balance sheet constraints question, I can just say that we have not -- currently, we don't have any constraints in terms of the acquisitions that we've announced. We're satisfied with the financing that we have to be able to complete the Inteliquent acquisition. We of course, don't comment on future acquisitions. That's a separate process, but we'll come back to that if we had something different.

Our next question is from Daniel Djurberg of Handelsbanken.

And congratulations to stellar messaging growth. I have a question first on Wavy, consolidated now since, I guess, 3 weeks. And we have the rolling numbers until March 31, I believe, at roughly SEK 1 billion or SEK 928 million and SEK 260 million in gross income. Can you comment a bit on the current momentum, has the momentum in the company been impacted by the quite lengthy M&A process? That's my first question.

I'll jump in there, Daniel. I think we'll refrain from any numerical on sort of how these acquisitions have been progressing in the interim period. I think what we can say is that the trends that we saw when we signed the deal, they have continued, and we're very happy with the progress, in particular with the development on next-generation conversational messaging.

Perfect. Fair enough. And then my second question, I guess, to -- on this interesting marketing cloud solution. So WhatsApp with Salesforce. Can you help me understand a little bit more on the revenue model, on the -- if it's revenue sharing somehow? And also if this is more or less the only WhatsApp cloud solution at Salesforce or if this is one of [indiscernible] or whatever? That's my question.