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

Good day, everyone. Thank you for participating in this conference call with Sinch AB following the press release that we issued yesterday. My name is Thomas Heath. I'm Chief Strategy Officer and Head of Investor Relations. And with me today are our CEO, Oscar Werner; and CFO, Roshan Saldanha. Some of you will have tried to listen in to our original conference call this morning. We experienced some technical difficulties and decided to reschedule the call so that everyone who is interested is able to participate. With those opening remarks, I'll hand the word over to our CEO, Oscar Werner.

Thank you, Thomas, and everyone, welcome to this call. There are 2 things we want to comment on this call. The first one is the statement we made yesterday regarding the reassessment of historical COGS reserves. The second one is the third-party analysis provided by Ninja Research. We want to be clear on that we would not comment on the Q2 report in its entirety with a report that was planned on the 21 of July will not close the books and cannot answer any questions on the quarter at this stage. Coming to the COGS, we have today announced a reassessment of traffic accruals or cost of goods sold reserved for historical periods, which has a negative impact of SEK 162 million on our COGS, gross profit, EBITDA and adjusted EBITDA in Q2 2022. There will always be small deviations in accrual processes. This division is, of course, much bigger than what should be expected. It is clearly an operating failure in certain parts of the organization. We take responsibility, and we're working very hard to ensure it will never happen again. We have decided to announce this before we find the rest of the Q2. The key reason is the strong share price reaction on the 11th of July, followed by the Ninja research. Then coming to the Ninja research. Although the report from Ninja Research did not focus on cost of goods sold. We want to be as transparent as possible and use this opportunity to address the claims about our same revenue recognition that Ninja has brought up their analysis. The Ninja report hypothesis is that seems as overstated our revenue recognition in 2021. This is something we strongly oppose and believe is completely unfounded and Roshan will give more comments. With that, I'll leave it to Roshan to make a more detailed explanation.

Thank you, Oscar. Good afternoon, everybody. The first topic, as Oscar said, is the COGS reassessment. And I will start with going through the process of how we handle cost of goods sold in the messaging business. Interest revenue are recognized at the time a message is sent. Cost of goods sold is generated by each individual message as mobile operators or partners charge Sinch a per message fee to terminate SMS traffic to their subscribers. Sinch received invoices from mobile operators and partners and in some cases, many months of the traffic was generated. Therefore, Sinch accrues for mobile messages as part of its normal day-to-day operations. On a regular basis, we also match these accruals with invoices. We closed traffic periods normally after 6 months. But even at that time, there might be outstanding invoices from mobile operators or partners. During this regular process, we have observed that the reserves were insufficient. And hence, we have been matching underlying data from multiple platforms, including acquired platforms, which are not integrated in reconciling them. This was done with the purpose of quantifying the gap. We have then reassessed our reserves also based on expected future invoicing. This work is concluded now, and that is why we communicate it now. We believe that the reserves are sufficient to materially cover non-COGS cost after this reassessment. The reassessment of classic accruals, we have now performed and informed about relates to termination costs or messaging during historical periods, a larger part of this relates to invoicing from a small number of specific operators during a period when we conducted technical integration of multiple acquired platforms. Reassessments can include corrections due to changing accounting estimates or corrections due to errors, the $162 million reassessment includes a SEK 40 million correction of errors. This latter amount is considered immaterial in relation to the entire previous year COGS. Hence, we will be treating this as a reassessment and taking the total impact in Q2 2022. There will always be some deviations, as Oscar said, during such matching processes but they have not been this big before. A complex technical setup augmented by recent large acquisitions, interlinkages between multiple legal entities and higher reliance on manual processes has resulted in the reassessment we have now informed about. We have since then increased resources, clarified roles and responsibilities and/or improving processes and systems to secure that we do not have such large deviations again in the future. And this reassessment will, of course, negatively impact COGS gross profit, adjusted EBITDA and EBITDA in Q2 2022, as I said before, with SEK 162 million, but there is no additional impact on net cash from this reassessment since supplier invoices are received and paid in accordance with normal business practices. With that, I'll move on to prepared remarks on the second topic, which is the hypothesis in the Ninja report that our revenues for 2021 are overstated. They are not and I will start with explaining how we handle revenues and accounts receivables. We have not heard about [indiscernible] Research before. We received the analysis yesterday, they do not have any contact persons and have not engaged with us. The analysis they have published includes a range of different claims, many of which are relatively less material. And therefore, we will focus today on their claims that their revenues are overstated. As I said earlier, revenues are recognized when a message is sent or when a voice call is made. In the messaging and in the voice business, we normally invoice our customers on a monthly basis. Two things happened in 2021: Number one, we acquired Inteliquent. They also recognize revenues in a similar way, and hence, we want a harmonized way of reporting. We tightened -- secondly, we tightened the closing process, which is the period that we used to close the books at the end of a month or quarter. The impact of this was that when we passed the last day of the quarter, without having invoiced our customers, there is a certain amount that is not yet billed to the customers. And according to this, we treat this amount as unbilled receivables. Given the above, we choose to break out unbilled receivables in the annual report for 2021, this has existed before, but was included in accounts receivables. In summary, under receivable is the income that has been recognized but not yet invoiced. And it is treated as receivables because all contractual conditions required to receive that payment have been fulfilled. And hence, we have an unconditional right to payment. Also going back to the Q1 presentation. If you remember, when we want to compare 2020 and 2021, we need to add up receivables both unbilled and normal trade receivables. We have more or less doubled the company during this period, and therefore, we also need to compare with pro forma revenues. Hence, in the Q1 presentation, we had prepared a slide showing day sales outstanding and days cables outstanding, which has been developing in a range bound manner. Finally -- or I want to add that we don't have any materialized -- material realized bad debts during 2022 related to the balances as at the end of the year 2021, which further supports our -- the quality of the receivables that we are reporting. The final proof of the quality of receivables, of course, in cash collection. We generate cash while cash collection can be lumpy on a quarterly basis and was weak in Q1 due to previously stated reasons regarding -- regarding working capital, it cannot continue to be the case. And now when we do not have any major acquisitions, we believe that this will be proven in the upcoming reports. Thirdly, there are many other claims in this research report, including some regarding India and Australia. Looking specifically at India, ACL Mobile revenues are circa 6% of Sinch Group revenues. The research report states that we had a qualified opinion, which is factually incorrect. We had an unqualified opinion on the financial statements. However, in an appendix to audit opinion on the financial statements, there is information regarding the internal control of our financial reporting where there was a qualified opinion. And this relates to the fact that as at March 2021, that is a couple of quarters after we closed the acquisition the provision for doubtful debts was -- process was not being to be sufficient. But this is something that we did address and corrected and hence the auditor gave an unqualified opinion on the financial statements, which is not reflected in the research report. When looking at Australia, I think the legal entity that is the primary operating entity was Sinch in Australia; Sinch Australia Pty. Limited. In addition, we have 2 smaller holding companies. All of these companies are active and can easily be found on the Australian company's office records. The reported revenues for 2021 in Sinch Australia is around AUD 5 million or SEK 35 million, which is about 0.2% of group revenues. The research report them based on these inaccuracies in the corporate identity number of calls into question, the U.K. revenues, which are several factors larger than the Australian revenues. So in total, of course, we push back on all of those comments and are confident as to our revenue reporting and on our receivables balances. This is something that we evaluate on a continuous basis. With those comments, I would like to hand over to the operator for any questions.

[Operator Instructions] The first question comes from the line of Predrag Savinovic with Carnegie Investment Bank.

Starting with the COGS side and based on your commentary, it sounds as these are quite large operators and thus important for the overall business. You have stated that there have been inadequate control systems behind this conciliation. Then Oscar, you mentioned in the beginning, you're working hard to ensure it's never going to happen again. So I'm wondering if you can give some flavor on what visibility you have here going forward and how you strengthen the process to make this -- make sure that this doesn't occur again? And then a follow-up to that also in terms of timing in which period did this occur into because depending on the timing, you can draw different conclusions. For example, if it's all concentrated to Q4 when you closed several large acquisitions, then $160 million is large. But if it's spread over the year, it's relatively smaller. Thank you.

The areas we're doing improvement is -- and I'll give you an overview, and then Roshan can give more details. But there are 4 areas we've been focusing on. It's system improvements in order to automate more and make the underlying data quality better. It is process improvements, so strengthen the reconciliation process and then looking at where have we had efficiencies and how do we improve that is roles and responsibilities, both making that clear, but also comes with our new operating model, which truly gives a true ownership for all things relating to COGS on a few set of hands. So we're happy about having done that, and therefore, giving strong stronger ownership. And then resources, increasing resources in several areas to control these areas, to control and make sure we don't end up here again. So that's the 4 main areas. Roshan, you can give more detailed comments, if you wish, on those areas or take the next question.

Yes. I think that was clear, Oscar. I think just maybe to add, right? I mean, obviously, we're going to a phase where we have multiple acquisitions coming in and cross-platform transactions in the messaging business covering multiple legal entities and jurisdictions. So there is a certain amount of complexity as we go through this kind of integration phase, which has contributed certainly to these 3 assessment. So I think just some humility for kind of even if you're making improvements, I think we're trying to cover all things that we are -- that we find and we're really working to improve processes. But I think that's the other big part of equation. On the second question, Predrag, I think we -- these costs are, of course, primarily not only, but primarily related to 2021. And they are kind of more or less evenly spread throughout the year with maybe a little bit higher weightage to the former, to the first part of the year. They're not in any way connected to the large acquisitions that we have closed in Q4 2021. If that was some answer to your question.

Yes. No, that is very clear. And may I ask one final one.

Go ahead.

I think you have been quite clear generally that you oppose the third-party research that was published yesterday. But is there any new view you can give on the visibility you have on these accounts receivable as a whole? Any update in terms of the provisions up to date? And should we expect that this will turn into cash flows?

Yes. And I think just a quick response. I mean, as I said during my comments, all of the unbilled receivables are being invoiced to customers just a couple of days after closing demand over the quarter. So this is more a process change in the sense that we are closing earlier rather than a process change in terms of our invoicing. So from that perspective, there is really no kind of change in our invoicing process. We have continuously evaluated and assessed our receivable balances. We do that, firstly, for material items for large items on individual account-by-account basis, and then for smaller balances, more in terms of classes and those classes could be by legal entity or by type of customer or age or materiality of amounts or different ways of categorizing those classes. And then we look at historical performance and bad debt in various classes and try to kind of make provisions on that basis. That process has existed and has not changed as well. If you remember, in Q4 2021, we did come out with an impact of SEK 37 million of bad debts related to a specific customer in the voice and video segment kind of in Sinch voice and video segment, which is, again, kind of proof of that, that we're kind of doing this on a continuous basis rather than just a one-off. And to answer your comment in 2022, we have -- that debt level's continue to be what they have been historically, and we have not seen any material bad debts come through related to the balances as at December 2021. And we hope that -- which I understand the proof of the pudding is in kind of at the end of the day, that's showing up in our cash flow reports, and we hope that we're able to kind of bring that to the market in the upcoming reports.

The next question comes from the line of Andreas Joelsson from Danske Bank.

Just on the COGS process, have you also had the chance to review Q1 '22, if there has been any errors or similar issues with the COGS in Q1? That would be my question.

Yes. I mean I think, firstly, as I started with saying, I mean, what we've done is we have reassessed our reserves. So we have not kind of -- we should not treat this as though that we've corrected kind of previous year or a specific period. We have reassessed our results in its entirety, which means that kind of we've looked at what the situation is as of today? And what kind of reserves do we need to have for COGS costs or traffic accruals that have not yet been invoiced to us, right? And by definition, that means then that we've covered all known tax for periods to date. Then of course, I mean, the later you get or the closer you come to today, the lower percentage of supplier invoices that we actually have received. So our ability to kind of confirm that with actual supplier invoices is lower, the closer we come to the current thing, so to say. But yes, that's -- I don't -- I hope that was an answer to your question. I don't know [ Roshan ] if you want to add something.

Yes. And just to clarify that, I mean, that is the normal ways of working, providing CPaaS services which will not differ between Sinch and other companies in our space. It's a part of our business that we receive invoices sometimes quite many months after the original transactions have been made and handling accruals is a part of our day-to-day operations.

And just maybe a follow-up on just you can confirm that you have not changed the way you recognize revenues over the years.

No, we have not changed the way we recognize revenues when it comes to the messaging business, which I think is the topic that is at question.

The next question comes from the line of Stefan Gauffin with DNB.

Yes, touch on the unbilled revenues. Is that primarily related to messaging or was that also related to Inteliquent. Which geographies are that related to in fact across all geographies or just get some more clarity on this issue.

Yes. I mean, again, as at December 2021, the balance of unbilled receivables that we reported is primarily related to, a, the messaging business, the Sinch messaging business and, b, Inteliquent or the voice, what we now have is a larger part of the voice business unit. The -- and essentially, I mean, I would say, from a voice and Inteliquent perspective, this is not a change. This is how they have always reported the came into being a part of Sinch, of course, in December 2021. But for the Sinch messaging business due to the fact that we kind of tightened monthly close procedures. This was a change during the year 2021 gradually as we had larger unbilled accounts receivable at month end close. However, again, just to repeat those unbilled account receivables are invoiced as the normal practice in the days following the close.

One thing to add here. This is described in Note 17 in the annual report for 2021. What might be a little perplexing is that we break out on billed accounts receivable for 2021, whereas for 2020, this was part of accounts receivable. The total amount increases from around SEK 2 billion to around SEK 4 billion, so total accounts receivable. That increase is due to the larger size of our group following acquisition and organic growth during 2021. So the increases on a like-for-like basis has to do with the larger size Sinch group following acquisitions and organic growth. The presentation of a new line item called unbilled accounts receivable is a clarification of where we add fidelity to improve clarity, and we're able to do that for 2021, but that was not the way we did it originally in 2020, right? So the total accounts receivable reflects the larger group. And it's important not to mix these 2 factors out.

And I think just to comment on your other part of your question, that, Stefan. This doesn't relate to any specific geography or a specific group of customers or operators, it's more related to us kind of, yes, related to process changes, process improvements.

I think to add also a little bit more color. When you look at total accounts receivable, if you want to calculate days of sales outstanding, Of course, you need to have the same in the correct base when you look at accounts receivable and when you look at revenues. So if you make that analysis, you need to look at pro forma revenues for 2021 and pro forma revenues for 2020 as of 31st of December 2020. Otherwise, it will not be a like-for-like comparison to calculate DSO. Some of you will recall that we elaborated on this already in our Q1 presentation, where we show DSO, this, of course, is a bit more made complicated by a large amount of M&A under a short period of time. The underlying DSO and DPO is relatively stable.

And then on the COGS side. So SEK 162 million, if that is primarily related to 2021. That is in total around 1 percentage point lower gross margin. Is that a fair assessment sort of -- yes. Just to understand sort of the future implications for this.

Yes. Yes, I'll stop off , I don't know if somebody wants to add something. But I think, firstly, as we said, I mean, this is a reassessment of reserve as at where we stand today. And therefore, we've kind of looked at the total reserve and that we've had and what we should have had in the books and also looked at kind of from a forward-facing, what is the kind of reserve we need to have for expected invoices, right? So that's kind of the work that's been done. But at the same time, we could say, of course, that the vast majority of this amount relates to 2021, as we've said before, and spread more or less evenly toward the year maybe with a little bit more weightage towards the first half of 2021. Now I think in the press release, we are commenting that, that amount if applied to 2021 would be equivalent to about 1.3% of COGS. I think the other thing to mention is that also that this is not only related to kind of the Sinch business, but it's related to both Sinch as well as the acquisitions that came into the messaging business unit in the latter half of 2020 and as well as 2021, which is the SAP Digital Interconnect as well as Wavy businesses. So it's a combination, and we need to compare it to the total messaging business unit.

[Operator Instructions] And the next question comes from the line of [indiscernible] with SEB.

I just want to kind of lift the perspective EBIT. And the margins in this business so far is not huge, even on an adjusted basis for EBITDA, it's around 10% or below last year, I guess. What is being made or done operationally to make sure that the business decisions that are made on a framework agreement basis with the client or on a kind of an application or are made with the correct amount of margin to make sure that after all costs and interest payments are done, there is a profit in every business transaction, if you see what I mean, because when you see these things coming up, and you accrue for costs for a long time and then stuff kind of comes back later, then it's very important to understand that you have room for this in your overall business decision-making to make sure you make a profit over time? That's my first question.

All right. So this is -- it's a very good question, right? And it's a very important topic for this kind of business. So we have obviously we have the salespeople on the right-hand side, if you will, in selling. And then you have a large amount of mobile operators on the back end, and we're doing smart routing decisions on a hour by hour or day-by-day basis. So that's the -- that's kind of the structure you have here. What we're doing is obviously that we're having the routing team that knows the underlying costs that understands what the costs are setting the floor prices to the -- setting the prices to the -- setting floor prices, salespeople. And then salespeople working with that type of floor pricing in order to make sure that you have a good enough margin. So that is the process. And typically, that has worked very well. And in some cases, you may see deficiencies. But typically, we have a -- typically, that is holding the margins up. Now we are working now on various things, especially in this inflationary environment that we see. So in an inflation environment, we obviously see costs going up from the salary side. And then we're seeing, all right, what do we do then? And how are we implementing in institutionalizing a way to increase our prices to our customers in order to have a good enough margin also in the inflation environment. That is a process that I think we're improving right now that during the last years, we not needed to do so much of.

Okay. And that's kind of my second question because you have been very vocal in tying your OpEx to the gross profit growth, i.e., if you as a division somewhere grows gross profit and you can grow your OpEx and so on. But given what we're discussing today, I struggle to see how you can control and check on that over because you don't really have control over the gross profit until months and months later and -- but you still drive OpEx by that measure. And isn't that dangerous and a bit opens up for huge margin drops at times? Or should there be another layer of safety there perhaps before one can drive OpEx? What do you kind of think about that?

I can start off maybe a little bit and Oscar might want to add. But point is, of course. I mean, I think, firstly, I mean, this is concerning, right, and we're taking steps to make sure that we improve kind of the reporting and transparency around it. But at the same time, this is about, as we said, about 1.3% of last year's COGS for the Messaging business unit. It's about 1% margin drop, right? So I think the important message here is to say that, of course, gross profit OpEx, we still believe in the relation between OpEx and gross profit, we want to control OpEx in relation to gross profit. We've already said at the beginning of the year that given the slower growth within the messaging business unit that we are putting in place controls around OpEx growth and also given kind of the overall macroeconomic environment that we believe that is the right thing to do. And that's where we are today and to reiterate that message that we need to get in control of OpEx growth. And at the same time, we need to make sure that we got the gross profit growth back on track. So I think reiterating that message that we had in conjunction with the Q1 report.

Okay. These are kind of high-level kind of how you drive the process. But since you guide kind of on those measures, it's just great to hear you describe them in a bit more detail.

Thank you.

Your next question comes from the line of Mohammed Moawalla with Goldman Sachs.

I have a few, if I may. Firstly, in terms of the COGS change, could you just give us some background what triggered it what was kind of done incorrectly previously. You talked about sort of adding more resources to sort of improve things going forward, but still mentioned that there could still be some more deviation, can you kind of help us understand that? And to the extent that you can give more color on this COGS restatement, which geographies was it in? I know you sort of called out some big operators, but you're not giving us more detail. So just curious to get more of this and more philosophical question, why didn't you just restate the historical numbers in 2021 given that's when it occurred? The second question was basically around free cash flow reservation. You mentioned that there should be an improvement in the free cash generation and reduction in some of those working capital drags, can you be a little bit more specific on the timing of this. Could we see this as early as Q2? Or is this going to be more sort of back-end loaded in terms of the horizon. And related to that, obviously, the implications are significant here because of the de-leveraging. So I think you're kind of running at 3.5x sort of leverage, but I believe that there's also a bond where there's a covenant there. So as we think of the implications of this restatement, what is the kind of cash flow implication, how much of that can you compensate for? And then just a clarification question. I think, Roshan, you mentioned, I just want to make sure I heard it correctly. You said there's no cash impact, but the impact is just on an EBITDA and gross profit from the restatement. That would be great.

Yes. Mohammed, sorry. Mo, you might want to come back if I have forgotten any of your questions here because there was quite a few, but I'll try to cover some of them with help from others here in the room. I think firstly, of course, what we've done, as I said, is working with COGS accruals as part of our day-to-day business. I mean invoicing from operators happens at a point in time after we send the messages, I mean we rarely see kind of all the invoices even when we close the quarter. It can be -- even today, I mean, there are invoices outstanding from periods before December 2021, right? So that's just the nature of this business. And I think that's what we deal with. The -- it's a complex process with data from multiple systems, traffic flowing from multiple systems. We, of course, operationally, what we want to do is we want to consolidate our traffic source operators on the most beneficial contract, which means that kind of we will have cross-platform transactions and that kind of complicates this process, right? Now what we've done is, over a period of several months, we've gone through historical data from various systems and countries matching them to each other on a detailed level. And then kind of the amount that we've identified is the total amount of various identified differences. This includes kind of normal true-ups and to downs, but it also includes specific transactions that due to system weaknesses were not captured in the relevant reports or not captured in kind of -- in our estimates. So I think that's kind of slightly more detailed description of what has happened. When it comes to I think your questions on kind of the cash impact and the leverage, if I try to take them then. What I did say is that there is no net cash impact of this reserve. Obviously, you can say that it's quite -- we will take the impact in the Q2 2022 book. So to that extent, it will impact Q2 2022 reported EBITDA. Obviously, we're increasing reserves, so that will have an impact on working capital as well. But those 2 should net themselves out in operating free cash flow. And then, of course, but if you look from a net cash impact these supplier invoices are paid as and when they are received, and that practice has not changed. That continues to be stable from a comparison period perspective. So that was my comment on the cash side. When it comes to leverage, I will not speculate on Q2. I think both when it comes to leverage and in terms of cash flow, I mean, we are reporting Q2 in a quarter -- in a week, sorry. And as Oscar said, [indiscernible] that kind of questions on Q2 in this call because we're not ready with the report yet, and we have to take it when we are reporting Q2. When I said that, of course, the nature of our business and the underlying kind of -- the underlying business trend is in that we generate cash and Q1 was more of an aberration in the sense that we had a situation with some large customers that did not pay in time on the right side of the quarter. that is not normal practice, and that's something that we will correct. So my question was -- my comment was more kind of broader, long term, not specifically on a specific quarter. When it comes to your question on the leverage. As we said before, the Board has a leverage target for the company, which is to stay at 3.5x adjusted EBITDA over time. You're right in that we have an obligation, Swedish bonds that has a covenant -- a light covenant at a lower figure, I think 3.25%. But that is an incurrence test, which means that it is triggered only if we take up new debt. So this does not trigger otherwise. So yes, I think -- and I hope I have addressed all of your questions, but okay, sorry, Oscar is reminding here about restate 2021. I can take that briefly as well. Again, as I said, I mean, this reassessment consists of both changed accounting estimates and or correction due to changed accounting estimates and corrections due to errors. When we look at kind of the reassessment of the whole, we can see that the correction due to errors is SEK 40 million of the total SEK 162 million, which we deemed to be not material. And therefore, we believe that we from an accounting perspective, can take the cost in Q2 2022. We also -- and this is a little bit softer, maybe but softer reason, not really an accounting reason, but I think from our perspective, it's also about owning up to what has happened and actually making sure that we reflect that in the report for Q2 2022, the negative impact of this reassessment. I hope I answered all of your questions.

Yes. I just want to clarify then on the working capital sort of progression and reversal, I guess, you're not putting a kind of a precise time frame around that right now. I heard you correctly. And that's going to kind of come back progressively. Is that the way to think of it?

I think -- I mean, the only thing I said is I don't want to comment on the Q2 report today because that's what we said we will not comment on. I think then we can come back, make that question in a week's time. I think that's maybe a better time to address it.

The next question comes from the line of Andreas Markou with Berenberg.

Two of them. The first 1 is basically on the very negative sentiment that has been created after this short report. Obviously, the call and the explanation -- the call we're having now an explanation given helps, but do you think something like potentially some an independent auditor view something like that would help kind of restore confidence. That's the first one. And then the second one is something that is mentioned in the report about your Whistleblower hotline. Why did you actually shut that down?

Thank you, Andreas. A few questions there. Firstly, we have a whistleblowing functionality in place and have had for a long time, that has not stopped. So we think this is a misunderstanding. Generally speaking, in terms of how we work with accounting, of course, as a stock listed company, we follow the rules -- applicable rules and regulations and work continuously with our auditors to ensure the integrity of our financial statements, which is a continuous work, which is reflected also in the reassessments we're doing today, where we're addressing some issues and making improvements. In terms of longer-term ultimately, longer-term credibility. Of course, when we find ourselves in a situation where there's a little bit of mix of everything in terms of skepticism and criticism. We deem the best way forward is to deliver good results, grow profits, translate profit into cash flow. And then it might take some time, but we think that's sort of the most concrete way rather than then stack claims on top of each other. So patience perhaps we will do our best to simply deliver good results.

And I think, I mean, just to add on Thomas' comment there on the Whistleblower hotline, I mean we have a legal compliance section on the website. There is the code of conduct is available there, and there is an e-mail address that any is Whistleblower reporting can be done to, I think it's called integrity reporting line. So yes, to our knowledge, I don't think anything has changed.

[Operator Instructions] The next question comes from the line of Lloyd Jones with Redburn.

So it's regarding the unbilled receivables and the crude income again, if I may. I think one of the key issues raised in the report yesterday was that the Note 17 on accounts receivables and the Note 19 on accrued income, are inconsistent to the group in that you then show on Note 28 and where you split the accrued income and the accounts receivable in a very different way. Are you able to comment on that, please? And I guess the key question here is whether the accrued income that we see on Note 19 is a subset of the unbilled accounts receivable that we see in Note 17? I think any question -- any color here would be very helpful.

Sorry, can we just ask you to clarify, sorry, which part was part of what on Note 19?

Yes. So I think 1 of the notes raised was the unbilled accounts receivable that we see in Note 17 and the accrued revenue that we then in Note 19, the split that's given there. And then in Note 28, you group the accrued income and the accounts receivable in a very different way. I guess the key question here is, is the accrued income that we see in Note 19 a subset of the unbilled accounts receivable that we see in Note 17 because it looks like it is from the way that you present in Note 28, but it's not breaking. I think that was 1 of the sort of main issues that was raised in the report yesterday. So if you could clarify that, that would be very helpful.

We'll be happy to try to reconcile it to the best of our ability. You might have to reach out to us off-line, and we'll do our best to explain if you want to add any.

I think just very quickly, firstly, I think on the unbilled accounts receivable, I mean, as I said before, that's we consider that to be a part of trade receivables because all contract conditions are fulfilled, and there is an unconditional right to payment. The only difference to trade receivables is that the invoicing takes place a couple of days after we have closed the books.

Yes, I think that it's clear, but I think it's whether the accrued income is a subset of the unbilled accounts is the main question.

I understand. And per definition, I mean, the accrued income would be a contractual -- would be a contract asset. But let's come back and let's make sure we get...

If you could clarify that it would be helpful. Yes.

I think we're looking towards the end of our queue of questions. I've noted some media questions. Media are happy to reach out when we do our best to accommodate you and any other investor question don't hesitate to reach out. I think we have 1 more question here I see and we can make that the final one. Operator. We have the last question here from Bank of America.

The next question comes from Mr. [indiscernible] Ramon, Bank of America.

Just to quick question. Can we expect any further reassessments of historical financials? And can we expect any updated opinion from the auditors or any assessment reassessments on their part?

We're not aware of any needs to reassess any other part of the financials at this point of time. There is nothing else that we are working on and that we're aware of at this point in time. So no, is my answer to the best of my knowledge. The on the second point, I think I will not speak of auditors behalf, they have to speak to themselves there. We have, of course, done a full review of 2021. This is considered to be a reassessment, which is based on materially on new information that has come to knowledge. We, of course, have a very active and good dialogue and share information, and we are fully aware about kind of the information that we are providing today, and we ve had the opportunity to review and look at that information, but they are not audited, of course. Since this is not -- the Q2 is not an audited report, so to say.

Okay. And with regards to the sort of opinion for the full year '21, does that -- any changes to that? Any updates that they may make in the future?

No, not to my knowledge. But again, not to r knowledge. I mean to the extent that auditors would have a view on anything that would -- they would have to communicate that. We have a continuous dialogue and are happy with that relationship, so not to our knowledge at this stage. Thank you very much for that last question. And operator, thank you for hosting this call in a more successful way than what we attempted this morning. Thank you, everyone, for the interest and for reaching out and we will try to accommodate -- follow up any other questions you have to Investor Relations just reach out by e-mail. Thank you very much. With that, we will end the call. The next time we speak, would be after our Q2 results, where we will answer further upcoming questions specifically about results. Hopefully, we cleared the questions with this conference call, and we thank you for your interest.