Sinch AB Stock

Hello, everyone, and very welcome to Sinch Q2 2026 Earnings Presentation. My name is Mia Nordlander, and I'm Senior Vice President, Investor Relations and Sustainability. And with me here in the studio today, I have our acting CEO and CFO, Jonas Dahlberg; and our Senior Vice President, Corporate Control, Sofia Ohlander. You will hear Jonas and Sofia present the quarter, and thereafter, we will have time for questions. [Operator Instructions] So once again, very welcome, and I hand over to you, Jonas.

Thank you, Mia. So let's look at the first quarter highlights. So on the highest level, I would characterize the quarter as stable, largely in line with expectations we had when we exited the first quarter and most importantly, with strength where it matters the most. We accelerated organic revenue growth to 6%, driven by Americas and the API product category, and we experienced stable organic revenue development in APAC and EMEA. We delivered solid profitability and strong cash flow.

Organic gross profit was a little bit on the soft side due to unexpected developments primarily in APAC. Nevertheless, adjusted EBITDA margin is within our target range and cash conversion is significantly ahead of guidance. We continue to experience strong commercial momentum led by Americas with an increased share of cross-sales, proving the value of our joint go-to-market model.

And our market leadership is reaffirmed by industry analysts and key customers such as Gartner, IDC and Adobe. And with those highlights, let us look at performance by region. So what developed as expected, and if anything, actually better than expected is our largest region, the Americas, now represented 2/3 of group gross profit. The Americas grew 9% organically during the quarter, and this revenue predominantly comes from the API product category that delivered mid-teens organic revenue growth, driven by messaging and e-mail. And this is a sign of strength in several ways.

Americas is the largest region, growing close to double-digit. It's proving the strength of the market, and it proves our position in this important market. And the growth comes exactly from the right product category that is the API product category. Combined, this bodes well for the future. Strength in the U.S. and in APIs is key to win in the emerging API customer communications market. Now in parallel, Americas grew gross profit by 10%, thanks to a combination of the growth we just talked about in the API product category, but also reduced transmission cost for network voice.

In all, Americas developed in line with expectations or actually slightly better. EMEA also shows encouraging signs. After 3 consecutive quarters of revenue decline, revenue has stabilized in EMEA. Fixed-price messaging supplier contracts are stable, both on sequential basis and compared to the same period last year. And we also expect these contracts to be stable going forward. However, while the stabilized revenue development is encouraging, we have a slight organic GP decline in EMEA, and this is driven by basically discontinuing a specific product and churn from that.

And this is the same product that dropped out of Americas during the second quarter last year, which means this product now is essentially discontinued. In APAC, which is the smallest of our regions, we continue to face headwinds. Some of these headwinds are temporary, but some are also expected to persist going forward. India is solely responsible for the organic revenue decline in APAC and is impacted by challenges, including a SEK 17 million additional revenue provision related to the same customer dispute as we disclosed in Q1.

In Australia, we also had some margin compression in applications, but there are also signs of strength here. We saw strong growth in e-mail and messaging APIs outside of India. While we can't be certain that we have completely bottomed out in APAC, we believe that the worst is behind us. India represents low single-digit percent of group profit. So whatever happens, can't have much of an impact going forward. And we should recognize that APAC in total is still our most profitable region. So that's a sign of strength.

Moving over to commercial momentum. In the quarter, we continue to experience really strong commercial momentum. My intention is not to go through every individual deal. Rather, I'd like to relay a few overall highlights. First, we are closing deals across all motions, new customers, existing customers and through partners. We have closed many sizable deals with 6-figure euro or U.S. dollar amounts and one 7-figure U.S. dollar expansion. And the deals are predominantly American, but it comes from all geographies. and the deals span industries, including tech, retail, financial services, media, travel and more.

So this means we continue to develop a diversified customer base across geographies, sales motions and industries. And I think this provides a strong jump-off point to the future. Now I'm early in my CEO tenure, but I've witnessed a lot of strength across the business over the last year as CFO. And I'd like to share some thoughts on the growth engines I see for the future. So broadly, I see 3 levers of growth going forward, delivering on different time horizons. Firstly, it's about doubling down on our current success, and this is the U.S.

It's the fastest-growing market. It's also a market where we are growing the fastest. And as mentioned earlier, this is also where the world's AI companies are coming from. And this is the next wave of growth that we see happening. And our San Francisco office is just a couple of blocks away from all these giants. So we think that Americas is and will continue to be a key growth engine. Now secondly, in the product dimension, here and now, it's about continuing to grow our e-mail business. We have talked a lot about RCS in the past. RCS is growing very fast, but from a low base, but e-mail is truly a meaningful part of our business, and we'll talk a little bit more about that.

Next wave is about increasing our net revenue retention. And the way to do this is target fast-growing customers, increase up and cross-sell and strengthen loyalty to reduce churn. We'll talk about more about that in a bit as well. And finally, it's obviously about developing our product portfolio of innovative products and solutions for the future. Now I will talk more about all these levers as we continue in this presentation, but I want to start with e-mail. So most people know Sinch as a messaging company, and that's great.

But what most people don't realize is that we are actually quite diversified across e-mail, messaging, applications and voice products. And e-mail is very much a contributor to our success. Actually, from a bottom line perspective, e-mail is roughly the same size as messaging with the same EBITDA contribution. So -- and e-mail is also truly a growth engine for Sinch. We have, over the last few years, grew at a double-digit clip consistently in e-mail and at high profitability, this has a meaningful contribution to value creation, both here and in the future.

So what is Sinch e-mail? What's special about e-mail? So Sinch e-mail is a developer-first platform that enables businesses to send, receive and optimize e-mail customer communication at scale, whether it's marketing campaign, transactional updates, identity verification or customer service. The platform helps businesses to communicate with their customers on a daily basis.

Our customers ranges from start-up to some of the world's largest and global brand, many who depend on Sinch e-mail for mission-critical communications. And what sets us apart is the strength of our platform behind it. We have 99.99% uptime, meaning just a few minutes of downtime every year. And we do this with 97% delivery rates in e-mail. And I think as all of us can relate, our e-mail inboxes is a very cluttered environment. We have spam filters to protect us from unwanted e-mail.

But sometimes these e-mail spam filters, they err on the conservative side, and this is where our delivery rate comes in. 97% is very strong. And the platform is certified for industry standards for security and data privacy, making it a viable solution for mission-critical enterprise solutions, including healthcare. But maybe this becomes best understandable when we start to look at the numbers, putting delivery behind it. On average, we deliver 1.6 million e-mails per minute, and that sums up to 850 billion e-mails a year.

And the volume is growing with 20% (sic) [ 21% ] a year. So we're soon looking at passing 1 trillion e-mails per year. The takeaway is this, e-mail is not just another product in Sinch portfolio, and it's definitely not a commodity. It's one of our largest businesses. It's a rock-solid platform delivering customer communications at massive scale, and it's a key driver of value creation, both today and tomorrow. Moving over to net revenue retention. And one theme there is to increase our cross-sales.

As you know, Sinch started to integrate our independent business units about 3 years back with a joint go-to-market model. We spent considerable efforts integrating, allowing for cross-sales across channels. This has not been easy, but we're now starting to see the benefits of our hard work. In fact, if you look at the second quarter, 50% of the top 10 new deals in the quarter were cross-sales of products to existing customers. This means an existing customer of one product line, say messaging that actually buys into a new product line such as e-mail and voice.

So cross-sales is getting traction and with the broadest and most global offering in our industry, this is not only a growth engine for new deals, but it's also galvanizing the relationship with existing customer, increasing loyalty, reducing churn. And together, we think this is an important growth driver for Sinch going forward. Now another part of increased net revenue retention is to target fast-growing customers.

Our industry -- in our industry, 95% of the revenue typically comes from existing customers that we had 1 year back. So a safe bet to growth is making sure to go with winners. And the winners right now are the AI natives. That is companies that didn't exist a few years back, who base their entire business model on AI and who grows extremely fast. Now similar to existing customers of Sinch, they need customer communications, but they are growing at a much higher rate, meaning they need massive scale and reliability from day 1.

And this is exactly what Sinch provides. We're offering the same products as we do to our traditional tech customers, and we're winning with proven commercial models that we have successfully used in tech. Essentially, we're talking about 3 different motions. Firstly, the direct customer relationship where one of our customers are using our products for their own benefit. Secondly, reseller motions. This could be a native integration where customers effectively resell our products as an integrated part of their own offering or thirdly, a partner motion over a marketplace where customers can sign up -- that partners' customers can sign up for our products.

Across these motions, we have many years of experience from tech. And during the last 6 months, we won several hyper-growing AI companies. And we will expand this relationship and also focus on winning new customers in this segment. Lastly, we're innovating our product offering to deliver new and exciting products for all customers, products that will deliver growth in the future. And as we did last quarter, I want to showcase our innovation. This time, we look at the conversational commerce use case. And this solution uses several of our products to drive a better end customer experience, improved sales conversion and ultimately growth for retail.

The innovation here comes from solving existing pain points in new ways. And what you'll see here is an e-commerce experience entirely over the messaging channel, highly personalized to the individual customer with no handover between channels with minimal friction to purchase, all working together to maximize sales conversion for the retailer. And the example you will see uses several of our API products and the benefits here are clear.

No passwords, no forms to fill in, no handovers between channels, jumping between messaging and the web, no hurdles. It's truly a frictionless experience. This is live with customers. It builds on products we already have today, but pulling them together provides a new type of experience, and we think this type of solution will provide very meaningful growth going forward. So we're going to take a look at it before handing over to Sofia, who will walk us through the financials. Please?

[Presentation]

And now it's time for Sofia to present the financials. So over to you, Sofia.

Thank you, Mia. I'll start with a few words about myself. My name is Sofia Ohlander and I am Senior Vice President at Sinch. I have been at the company for about 5 years working in various roles across finance and for the past year, working very closely with Jonas, supporting him in his role as CFO. And very happy to be here with you today to present the Q2 financials. Let's start with the top line numbers.

As a reminder, as we report in SEK, while USD is our dominating trading currency, we always point to organic growth to measure the underlying performance of our business. And organic revenue growth came in at 6% in this quarter, which is an acceleration versus last quarter. This is driven by Americas, our largest segment, and API, which is our largest product category. This is very pleasing to see, of course, and Americas came in at 9% revenue growth.

Cost increases from certain U.S. suppliers were passed on to customers at cost, supporting organic revenue growth by about 2 percentage points. While this has an effect on gross margin, it's a natural part of our business, and we don't see this as a sign of a shift in underlying profitability. As a side note, the contracts that we sign in Americas API are actually coming in at stable margins. So all in all, in Americas, we see momentum and solid performance in our business. After a few consecutive quarters of decline, EMEA has stabilized at flat revenue growth.

And APAC comes in slightly negative. And the negative revenue growth in APAC is really driven by India, where we had a SEK 17 million revenue adjustment from a customer dispute, and that was actually the same customer dispute that we spoke about in Q1. So as Jonas mentioned, India represents a small share of our business. And even if a one-time revenue adjustment like this has an impact on group numbers, further downside should have a limited effect sequentially.

Moving on to GP. Organic GP growth came in at 2% in this quarter. And again, this is driven by Americas and API, where we have our messaging and e-mail products. Further, GP growth is strengthened by network connectivity, where we see the benefits of the shift of TDM to IP technology and Americas GP growth came in at 10%. EMEA declined in this quarter, 4% negative organic GP growth. And this is largely driven by churn in the legacy verification product. And like Jonas mentioned, it's the same product where we saw churn in Americas last year. And API -- sorry, APAC came in at a negative 18% GP growth.

And this is largely driven by India, which again represents a small part of our business. And in APAC, we further have some margin compression in our applications business in Australia, which weighs on GP growth. So all in all, accelerated revenue growth and stable GP growth in this quarter. Let's take a closer look at the gross margin. The gross margin is slightly down sequentially and down by 1.6 percentage points on a year-over-year basis. This is driven by a few different factors, which I will lay out before you.

We've spoken before about the shift of TDM to IP and that has a positive impact on our gross margin, and we see that also in this quarter. The challenges in EMEA and APAC that I mentioned, they weigh on the gross margin, and these effects combined more or less net to 0. So why does the gross margin go down? The increased COGS that we pass on to our customers as cost has an effect of about 1 percentage point on the margin, a negative effect. And the remaining is really FX.

In Q1, we mentioned that sometimes we have revenue in COGS in different currencies and with rapid FX movements, we can see a temporary impact on our gross margin, and that impact in Q2 is negative of 0.5 percentage points. And with this, we are confident that our gross margin is within normal variations. If we look at adjusted EBITDA, we see that adjusted EBITDA is steady sequentially. It's down 0.2 percentage points, but then we see a drop of 0.6 percentage points on a year-over-year basis.

And this drop is really driven from the gross margin. What's pleasing to see is that adjusted EBITDA and EBITDA are moving closer and closer together, and this is really driven by the reduction of our adjustment items. And in our adjustment items, you can see our transformation costs, which primarily is integration costs, which are down 2/3 on a year-over-year basis, which represents SEK 30 million. And integration costs are down since we finalize integration projects such as CRM and a joint HR system, et cetera. Moving on to take a closer look at our costs. We continue to be in control of our costs.

We have an adjusted OpEx increase of 1% in this quarter, and that gives us an adjusted EBITDA growth of 4%. And it's relevant to look at the distribution of this OpEx increase. While G&A is down on a year-over-year basis, we reinvest the savings from these functions into growth functions. And by that, we mean product, technology, sales and marketing. And we will continue to make select investments into growth initiatives in these functions. Simultaneously, we will focus on driving productivity improvements across the board. Adjustment items are down, which gives us an EBITDA growth of 7% in this quarter.

A closer look at cash flow. Our free cash flow came in at SEK 751 million in this quarter, and that gave us a cash conversion on a rolling 12 basis of 61%. This is above our guidance and it's a strong cash flow. I want to emphasize a point that we usually make, which is working capital may have swings between the quarters. We have large customers and large suppliers, and we can see temporary ups and downs. These fluctuations are part of our business. And with that said, it's very pleasing to see a solid and strong cash flow in this quarter.

Let's see what this does to our leverage. Our leverage is slightly down in this quarter at 1.9 versus 2.0 in the previous quarter, and this is really driven by the cash flow. In Q2, we have repurchased 4 million of our shares. And since the start of the program, we have repurchased 15% of our shares. This is on the back of solid profitability, strong cash conversion and a solid financial position. And this morning, the Board of Directors initiated a new buyback program, enabling us to repurchase up to 10% of our shares up to the next AGM in 2027. So with that, I'll hand over to Jonas for some concluding remarks.

Thank you, Sofia. So concluding the quarter before opening up for Q&A. So accelerated organic revenue growth led by the engine that's Americas growing at 9% and where it matters the most, that is Americas APIs growing mid-teens organically. Solid profitability, strong cash conversion, GP a little bit on the soft side, but that is mainly about APAC. And we continue with super strong commercial momentum, and that's why we're looking ahead with confidence, also thanks to a strong market position. And with that, let's do Q&A.

Thank you, Jonas, and thank you, Sofia. Now it's time for questions. [Operator Instructions] So we will start with the phone. I think first in line, we have Erik from SEB.

Just a couple of questions from me. I'll start off on the gross profit growth, and Jonas, you have previously spoken of an acceleration in growth in the second half. And you grew organic gross profit here 4%, I think, in H1. Is it fair to say that -- I mean, you still expect this? And how much of an acceleration are we talking about here? Is it growth in the high single digits? Or yes, what do you expect for the second half? I'll come back with another question.

Yes. So what we said when exiting the first quarter was we expect the second quarter to be stronger than the first quarter, and that applies to top line and organic GP growth. And I don't want to be more specific than that, but we believe second quarter will be stronger than the first quarter on those 2 metrics.

The second half, I guess...

The second half of 2026 versus the first half of 2026 in terms of organic growth numbers, yes.

All right. Excellent. Just wanted to ask on the dynamics in EMEA and APAC. Net sales growth looks to accelerate quite clearly. Gross profit didn't really follow to the same extent. If it's anything to call out specifically on EMEA and APAC on the gross margin? You explained the Americas one quite well.

Yes. So starting with EMEA. So what we're pleased to see is we have stabilizing revenue. And as you know, we have appointed a new leader for EMEA to reaccelerate the region. The impact we see on gross profit is basically exiting, churning this legacy, verification product, which has had super high profitability. And even if that has a financial impact, now this product is essentially gone, both in Americas and in EMEA going forward. So that is the driver of the drop of margin in EMEA.

And so on a sequential basis, we don't expect that going forward. APAC, there, we have more nuances. So India is mainly the contributor to the revenue decline. And we have this SEK 17 million provision for customer dispute, and that impacts and fall downs directly to GP as well. But in addition, we have some margin compression in applications in Australia. That margin compression in Australia, we expect to persist, while the impact in India, we don't expect to persist going forward.

Okay. That's very clear. Just a final one for me, perhaps on APAC, I think API platform was the main weakness even if you adjust for the one-offs that you mentioned, do you feel like you have a grasp on the turnaround in this region and that you've done the necessary measures to sort of turn APAC around? Or is this still a work in progress?

So we think the worst is behind. We can't be entirely sure that we have bottomed out in APAC. But what you see is on API in APAC that is largely India. In fact, we have positive momentum in API outside of India. So India and API is really the intersection, that's what -- where you see it. Look, India, low single-digit GP of the group. So whatever happens in India won't have a material impact going forward.

We still want to be present in India, we believe, in India simply because it's 1.4 billion people. It's the world's most populous country. And they are fairly advanced on RCS and WhatsApp in that market. It's a tough market. It's not easy, but it's important for us to be there because we see it as an option for the future, really. So we're definitely working on turning it around. It can take a few quarters, and I don't want to give any precise outlook, but I think the worst is behind.

And then we take the next question, that is Daniel Thorsson from ABG.

Two questions related to the presentation here. The first one on e-mail. And if I remember correctly, the e-mail business had quite large share of subscription-based revenues linked to volume packages, of course. But how are e-mail revenues or gross profit developing, for example, here in Q2, when you show that volumes are up 21% year-over-year. Are they halfway there or even less than that?

No, it's more than halfway. So we have consistent revenue and GP growth double-digit over several years in e-mail. So there is volume here, will drive like unit price compression, but that's a little bit the name of the game in this volume business. We have the scale, and it's a super profitable product. And that's thanks to the scale and the platform. Very few people can actually make profit out of this. We can, and we can do that at a very high profitability. So this is what's over time also driven some of the product mix shift margin improvements that we've seen, and we expect that also going forward.

I can maybe add to that, Jonas, that in terms of e-mail, we also see a very solid double-digit growth across all regions, and that's another sign of strength.

Okay. Okay. That's very helpful. And the second one, you mentioned that you would like to look more closely into net retention rates ahead. What are the levels today? And how has it developed during the last few years? And also potentially, what levels do you target ahead to reach the total growth target?

Yes. So we're not disclosing net revenue retention rate. Maybe we'll do that sometime in the future. What I can say is this is an opportunity for us to improve. And I think this is -- with increased cross-sales, targeting the right customers and with multiproduct relationships, we can strengthen our relationships with existing customers. So this is clearly an opportunity going forward.

Okay. I see. So let's hope to get some disclosure on that in the future then. A final one on operations then. Employees in the quarter are flattish versus Q1. Adjusted OpEx is also flattish year-over-year. What's the plan for potential growth investments and headcount development during the rest of 2026? Should we see more headcount in the second half of the year or...

I mean what I'll say to that is maybe a bit of repetition of what I said in my presentation. But you're absolutely right that we have an adjusted OpEx increase of 1% in this quarter. We have a solid adjusted EBITDA growth, and we come from the back of 18 months of very solid adjusted EBITDA growth.

What we will see going forward is the continued reinvestment of G&A -- of savings in G&A functions into more growth functions. And we will stick to our targets that we have communicated on the Capital Markets Day, which is an adjusted EBITDA margin between 12% and 14%, and we're well within that range. Then I could mention in terms of Q3, we have merit coming in, and that's always a slight uptick. But having that said, we will continue to manage our OpEx closely.

In addition, maybe repeating what we've said in previous quarters, we are now within the target range of EBITDA, and we will continue to be in that target range. But we prioritize investments in growth ahead of further elevating the EBITDA margin.

We take next one. It's Predrag Savinovic from DNB Carnegie.

If we start with -- when you comment around some of the major larger customer wins, are they typically starting out with one product from you? Or have you also been able to improve the sales motion so you can get a win, including several products from your portfolio?

Yes. Excellent questions. Thanks, Predrag. It's a combination. So we see still, I would say, the predominant motion is starting with a single product, but we have an increasing share of solution sales where we packaged several products in a bundle. So that is growing. And obviously, if we sell a solution with several products, that also drives stickiness in the relationship with the customers.

Okay. Very good. And then on the legacy product churn in EMEA, is it possible to quantify how much of a drag this has on gross profit and EBITDA now and what that drag can be in the coming quarters?

Sofia, do you recall the specific number?

Yes. I would say -- I wouldn't give the specific numbers, but I'd say that it's a significant part of the EMEA gross profit. And it's a churn now. So on coming quarters, it will be a drag for the coming 12 months, I'd say. Similar as what we saw in Americas when it's been washed out over the year, the comparables.

So to be clear, the churn is -- the drop in gross profit is very much related to this.

Okay. Okay. And then in terms of kind of where you exited Q1 in terms of -- you don't have specific guidance, of course, for what you expect, but would you say that your operating momentum now is on the same level as you kind of commented around it a few months ago? Or has it improved or even decreased post Q2 now?

So the difference really between when we presented Q1 and where we are now is, on balance, Americas is developing more favorably, but we didn't expect the development we've seen in APAC also in Q2. So that was on the negative side of our outlook. But besides that, it's more or less exactly as we predicted.

I think it's important to realize Americas is 2/3. And looking at APAC, it's -- it has a meaningful impact on the quarter, but it's only 13% of group gross profit. And a lot of this is related to India, which is low single-digit gross profit. So a small part of the business has an impact in this quarter. But the most important region, the engine, 2/3 of the business is doing well and in line with expectations or slightly ahead.

Let's take the next one in line is Viktor Hogberg from Danske Bank.

Just a housekeeping question. The SEK 17 million negative revenue adjustment in APAC in India, do you expect more ahead? We saw it in Q1 as well, probably it was isolated. And I know, of course, you see that India is not going to affect much more ahead. But just is there a risk that we're going to see adjustments also in Q3 and potentially Q4?

I would say now we're fully provided for this specific risk. You can never know if something else will happen, but we don't anticipate anything else, I don't know.

No, I fully agree with that. I think we're well covered with this provision that we've made now.

Okay. And now we have next one, Fredrik Lithell from Handelsbanken.

I have one for Jonas and one for Sofia. So Jonas, if we could get back to EMEA and maybe Europe and if you could put some more color on your sort of strategy and tactics in order to reignite growth. And if you could combine that with your slides on continued commercial momentum, where you have all the wins, the 6-figure wins, what you have achieved so far and what you see in front of you would be interesting to get some more feeling for the coming 12 months on your ambitions there.

And then Sofia, on net working capital, it looks like, for example, in 2025 that we took a step down in Q3 in what it provided. So is it fair to assume that Q3 is sort of a seasonally weaker net working capital quarter? Is that fair?

So starting with EMEA. So the way forward for EMEA is really to apply the success recipe from Americas, which is really about operational rigor in sales and customer relationships and making sure we have a sales organization that can deliver and sell a multiproduct offering. So we think we have the recipe and now it's just execution to get that going. And I think we will see positive momentum in EMEA a few quarters from now, latest.

Yes. And on the net working capital, I would not say that Q3 is a seasonally weaker quarter. It's a strong quarter for us usually on gross profit and net sales. And then as I mentioned, we can have fluctuations between the quarters driven by the fact that we have large customer invoices and large supplier invoices. So you might see a temporary fluctuation between the quarters and maybe that's what you're referring to in the past year. But I would say it's not seasonally weaker, and it's -- yes, I'll stop there.

Next one is Bharath Nagaraj from Cantor.

Hope you can hear me?

Yes, we can hear you.

Very good. I have a couple of questions. Is the joint go-to-market model that you're getting traction, is that outside of the Americas as well? Are there any differences you're seeing across the regions in terms of customer behavior, product adoption or other factors?

I would say the Americas market is more sophisticated, but it's not like it's worlds apart. We see similar behavior in EMEA and APAC. That's why we see similar opportunities in EMEA and APAC as well. So yes, that's my answer to that.

Okay. Okay. The second question is around for Sinch to close in on your end-of-year 2027 targets, growth targets, what level of EMEA and APAC growth will you kind of be requiring? Or are you thinking that it will be largely driven by Americas at this point?

So Americas will be the engine, and we expect Americas to continue to develop very favorable. And I mean, if Americas continue at the current level, and we just have a flat development in APAC and EMEA, we're very close to the guidance for next year. So a little bit of positive development next year in EMEA and APAC and sustaining where the growth rates we have now in Americas should take us there.

Okay. Okay. Makes sense. Just one -- last one for me. On the Cursor partnership, that's an interesting signal. Can you give us a sense of the commercial model, the revenue potential or any other pipeline that you have for similar marketplace or reseller deals with AI native companies?

So the commercial potential specifically for a single customer, firstly, I wouldn't disclose this if I knew. But quite frankly, it's difficult to know as well because across all these platforms, you can never be sure about the uptake, especially in the marketplace type of situation. But what we're trying to do is be present in all relevant marketplaces with all relevant AI customers.

We obviously won't win them all, but I think we will win our fair share as we did with, if you will, traditional tech, the hyperscalers. So somewhere, we will really strike a gold, I think. And in other places, it will be more an average type of development. Again, it's a little bit crystal ball, but this is -- these companies are growing. They need customer communications. We think it will be a very important part of the growth going forward.

Next one, we have Thomas Nilsson from Nordea.

Your U.S. peers like Bandwidth and Twilio are reporting very high growth rates in AI voice applications. What growth trends are you seeing in that segment? And how are your recent AI voice product launches being received?

So we see also high growth numbers in AI voice. I think it's important to realize when Twilio reports AI voice growth numbers, they don't disclose the absolute numbers. And we think we're in a similar position. This is an important part of future growth, but the market is still in infancy. So the growth is coming from -- the current growth is coming from other segments. On top of that, you see emerging growth in AI voice.

When it comes to uptake of our AI voice products, we have very positive reception of those products, but it's still quite early. So similar to RCS, it's not contributing in a significant way to growth here and now, but we expect that to accelerate over the next few years and then be an important part of the growth.

Okay. And a final question for me, if I may. You're operating in quite a fragmented market with many companies. What's your view on continuing industry consolidation going forward? And will you revisit M&A if you find relevant opportunities that are accretive to profitability?

Yes. We also think the market is fragmented, and we think there are clear benefits from consolidation simply because there are scale economies. We can see that from previous acquisitions we've done within a product category. And we're ready for M&A. And so we're looking at the market. And if the right opportunity comes up, we will act on that to drive consolidation. In addition, we're looking at M&A for adding capabilities to further increase the value-add on top of our current offering to be relevant in an AI future. So those are the 2 sort of broad M&A avenues we see.

It looks like Erik Lindholm-Rojestal is back from SEB. Is that correct?

Yes, I'm back with another question. Just a boring housekeeping question perhaps, but still important. So Sofia, you mentioned 50 bps impact on gross margin from temporary FX mismatch. And should we read this as sort of impacting gross profit and by around SEK 30 million extra? Or how should we read this comment?

No, I wouldn't see it as that. What I would say is that we have these temporary ups and downs on the nominal numbers for revenue and GP, and that can have an impact on the margin. When we look at GP and revenue year-over-year, we always look at organic growth and then we take away all of our FX movements. So we know that FX goes up and down and sometimes you win a little and sometimes you lose a little on the gross margin. And now with the large movements that we've seen, we chose to call it out because it has a significant impact on the gross margin.

Okay. Okay. But it's more temporary in nature, the extra large mismatch this quarter or...

I would say that, yes, exactly.

Okay. All right. Maybe one final question, but you just showed a slide with some AI native company logos. OpenAI was one of the logos. Is that one of your customers today? And what channels are you helping them in, if that's the case?

I can confirm that. I don't want to disclose which product it is, but yes, it's a customer. All those companies that we have logos on are customers.

Next one, we have Victor Cheng from Bank of America. Can you hear us?

Is it me?

Yes, it's you.

Sorry, the line just cut off when you announced my name. Maybe just one follow-up on kind of what's being talked about just now as well on AI voice. I mean you talked about fast-growing AI natives. Can you give us some color maybe on these new customers, AI companies? How much of that is driving your growth? And how should we kind of expect it to grow within these AI companies? And where do you see yourself positioned versus your competitors? Are you having a stronger market share with these AI companies? Any color around that, please?

Yes. First of all, we think this is mainly future growth. It's not a major share of the current growth. So we're winning logos and that starts at a fairly low volume. But as they are growing and our services to them, our wallet share and not only the wallet share, but as they're picking up the usage of this product, it will provide future growth. When it comes to our market position, to make it very simple, Twilio is typically earlier on these types of customers because they are stronger with their market position with developers.

We are more enterprise. So on the S-curve, we typically come in a little bit later when these customers need scale, reliability, enterprise support, these types of things. So that's the position versus Twilio. Versus Bandwidth, I would say, Bandwidth is more specialized on voice. Our voice capability and quality, I would say, is #1 in the Americas. They have been quite successful in this segment. So I think it's -- for us to truly demonstrate the strength of our offering in voice to win even more in that segment.

So if I understand this correctly, is it safe to say that you take the view that potentially these AI companies as they grow bigger and become more enterprise that they can -- eventually, there's a pipeline to help them graduate, lack of a better term to Sinch or...

Exactly. And this is -- we've seen this movie before. It's the same behavior that -- and same development as we saw 10 years back with the hyperscalers. Twilio was early, and we came in with an enterprise motion, and we won many of those customers. We think the dynamic is very similar this time around.

Next one, we have Deepshikha from Goldman Sachs.

Am I audible?

Sorry -- yes, try again, please.

Can you hear me now?

Yes. Now we hear you.

Can you hear me now? Yes. A lot of them have been answered, but just maybe 2. One is basically like, obviously, the comment on 2H GP growth being better than first half is reiterated. And given the comment on typically 3Q being a stronger quarter, both on revenue and GP, should we assume that like the phasing of it will kind of continue to mirror what we saw last year in 2H '25, so 3Q a tad bit better than the fourth quarter?

And second is more a housekeeping, is basically on the tax provisions. I think we see that like, again, we have SEK 200 million in the current provisions. So should we like assume that you will see a similar -- a number similar to SEK 35 million that we saw in the first half like being paid out?

So let me start on the phasing between quarters. Quite honestly, this is tricky. So that's why we want to talk about half years instead because potential swings even out. So what we're saying is we believe the second half of the year in terms of organic revenue growth and organic GP growth will be stronger than the first half of '26. Second question, Sofia.

Yes, exactly. On this tax provision, so you're absolutely correct that we have used SEK 35 million of that in the first half of this year. And we had the same question in the last quarter, and I think I'll give a similar answer that these things are tricky and difficult to assess. And the best estimate that we have at this time is that we will have a short-term outflow of SEK 200 million. That's a short-term part of the provision, and the rest is long-term. And when we have an update on that, we will make sure to inform you, but that's our best assessment at this point in time.

Thank you. I think that was it from the phone conference. We don't have anything on the chat today, but I would like to say thank you so much, Jonas. Thank you so much, Sofia. We will be back here for the Q3 presentation on November 5. If you have any questions, feel free to reach out to me. Really happy to answer your questions. Once again, thank you very much, and have a good day.

Hello, everyone, and very welcome to Sinch Q1 2026 Earnings Presentation. My name is Mia Nordlander, and I am Senior Vice President, Investor Relations & Sustainability.

With me here in the studio today, I have our CEO, Laurinda Pang; and our CFO, Jonas Dahlberg. And today, you will hear them present the quarter. Thereafter, we will have time for questions. [Operator Instructions]

So once again, very welcome to this presentation. I hand over to you, Laurinda.

Thank you, Mia. Good morning, good afternoon, good evening, wherever you are in the world. We very much appreciate you joining us here today. I think before we start going into Q1, which I'm very excited about, and I can't wait to talk to you about that today. I thought we'd start by just talking about the leadership transition that we announced here this morning. And that is that I have shared with the Board, my intention to step down as CEO of Sinch by the end of this year, by the end of 2026. This is very much a looking-forward decision, and it's with great pride that I reflect actually on the past 3 years.

When I joined the business 3 years ago, Sinch had grown substantially through several acquisitions that had quadrupled the size of the organization. And with that comes a lot of complexity, but tons of opportunity. So when I started as CEO originally, I was asked or I was given a mandate to do a couple of things. First was to stabilize the business. I was also asked to integrate the business and also to make sure that we were protecting profitability and improving profitability and ultimately to return the business back to organic growth.

And I'm really pleased to say that this team, this Sinch team, around the world has delivered on a lot of that. We're in a very strong position today. We moved from acquisition silos to where we are now when we show up as One Sinch to our customers. We have delivered the highest profitability of the company's history, and we have reignited organic growth. So all of those are extremely strong signals of what the future has to come.

And again, I'm both proud and grateful to the organization. So we have momentum in the business, and I'll talk to you a little bit about that here this morning with regards to our Q1 results, but also what we're seeing in terms of leading indicators. We are operating from a position of strength. Today's world of Agentic, the Agentic economy and the AI economy, Sinch is extremely well positioned to be a winner in that world. And again, we'll talk a little bit more about that here today. And also, we have structural tailwinds. So again, with regards to the AI economy, we think that communication volumes are going to explode, and we're extremely well positioned to take advantage of that and to deliver results.

So this is the right momentum -- or sorry, the right moment with the momentum that we have in the business. Leadership transitions can often be hard. And however, I think they can actually be very healthy and helpful. And it only happens if it's in a planned full way, right? We want to make sure that there's continuity in this business and I will work very closely with the Board to make sure that, that happens until I leave, though, I want to be very clear that I am in position, I will continue to run this organization with the same level of focus and intensity that I've brought to the table every day for the last 3 years. So I look forward to doing that.

There's a strong leadership team in place. As I mentioned, we have clear momentum. We have a strategy that will win for the future. And we have been delivering better and better every quarter. And so I think that's a great segue for me to talk about what the results were for Q1.

So as I think about the highlights from the quarter, it's really oriented around 3 areas. One is certainly the financial performance of the business. And Jonas will, of course, go through the vast majority of those details. I want to talk a little bit about the value creation and the return to shareholders and also about innovation, which is where I'll spend the majority of my time here with you this morning.

We had strong growth, and again, strong momentum coming into this year. So Americas delivered very nicely, and they have clear opportunities ahead to continue with the momentum that they've delivered in Q1.

At a total company level, we delivered 3% organic gross -- I'm sorry, organic revenue growth. And as you know, we do have FX headwinds. So I will always speak in organic terms because that is really the proof point of the underlying health of the business.

So revenue growth organically was 3% year-over-year. Gross profit growth organically was 5% in the first quarter. Adjusted EBITDA growth was 10% in the quarter, and EBITDA growth was 18% year-over-year in the quarter on an organic basis. Now that EBITDA growth is impressive, and it certainly came through with regards to the actual performance of the business, but also we had less restructuring and integration costs, given where we are in our transformation. So all very positive signs from a financial metric standpoint.

The second piece is, and I'll touch on shareholders first, which is, we've continued the buyback program through the first quarter, and you can read all of the details. But I would highlight the fact that since July, since we launched this program initially, we have repurchased 15% of the outstanding shares for Sinch. And what that means is that our EBITDA per share metric has increased by 15% year-over-year. But when you normalize for FX, because again, reminder, we have lots of headwinds given the fact that the majority of our business is denominated in U.S. dollar. With those FX headwinds, when you normalize for those, that EBITDA per share metric actually is 27%. So it is incredibly powerful and meaningful and something that we're very proud of.

The last piece I want to highlight from the quarter is around innovation, and I'll talk more about this as we move through my material here this morning. But we released 2 specific innovations and product capabilities to the market. One was around Agentic conversations, which allows organizations, companies, enterprises to bring their own AI agents to Sinch across all of our channels of communications, voice, messaging, email. So we brought that to market earlier this year, in the first quarter.

And then secondly, we announced Voice Relay. I'm going to talk a lot more about Voice Relay in a moment, so I'll leave it at that for now.

This is just a reminder of the value creation agenda that we put in place roughly about 2 years ago. And it's oriented in 3 different pillars. One is growth reacceleration. Right? We wanted to make sure that we have profitable and sustainable growth. The second pillar is around margin expansion. What we said we would do is we would reshape the business and reshape the product mix so that we can continue to expand margins. And then finally, we always talked about capital allocation. We're in a position of strength given the cash generation has been very strong for Sinch and will continue to be strong.

We are developing very well against our midterm financial targets that we communicated 2 years ago. But the strategy that we've put in place and it's oriented and grounded in our winning strategies, how do we go to the market and win and compete actually has to translate into something. And so I want to talk to you a little bit about the commercial momentum that we're seeing. This is where our strategy is actually coming to fruition.

What you can see across this chart is several multimillion-dollar deals and wins that we had in the first quarter. This chart demonstrates a mix of new logo wins, existing customers where we have expanded with them and then also some partnership capabilities where we think that partnerships are incredibly important in this entire ecosystem.

The other thing I would point out on this slide is that these wins demonstrate momentum across the regions and importantly, across all of our products. But there are several in here that I want to call out. I told you that I'll talk a little bit about Voice Relay and the strength of our voice capabilities. But I want to call out the fact that you have one of the largest hyperscalers in the world. You have one of the largest carriers, U.S. telecom carriers in the world and one of the world's largest hospital groups who have done deals with us in the first quarter to take advantage of our voice infrastructure, because quality matters when you're communicating via voice.

These large organizations recognize that, and I'm going to talk about that in a minute in terms of why Sinch is extremely well positioned to be able to take advantage of this moment in time that we find ourselves in.

Just a quick example is a customer called IHG. IHG is a hotel. It's the International Hotels Group. They represent and own brands like the InterContinental Hotel, Kimpton Hotel, Holiday Inn. They have 6,800 hotels across 100 countries. So a large organization that's very global. Their membership, their loyalty membership is over 130 million members. So quite a large group of people that they need to communicate with. This is obviously a highly competitive industry, and loyalty in the hotel industry is won or lost in the customer experience. You know this, when you go to a hotel, you want that experience to be very powerful. And you want to be able to communicate with whoever your hotel is in a clear and consistent way in the way that you want to communicate with.

So IHG is a huge brand. It's, like I said, it's global. But the reality is, they were dealing with the strategic risk, which is that their communications platform was built on a legacy environment, infrastructure that was built for, quite frankly, an era gone by. And so they needed to modernize, to be able to deliver the customer engagement and the customer experience that they wanted to help with their -- deliver to their customers ultimately.

So in walks Sinch, and in walks Genesys. You have these 3 brands, IHG, Sinch and Genesys coming together to create a new experience for these loyalty members.

So you know who IHG is. I just introduced them. Who is Genesys. Genesys is one of the world's largest contact center solutions that's cloud-based and cloud native in the world. It's one of the highest ranked contact center solutions also in the world. So they're the third leg of this stool.

Genesys comes to this and brings the platform itself. This is a powerful platform. It scales, it's secure, it's agile. It helps IHG start to innovate in terms of how they communicate with their customers. But Genesys admits that their powerful platform is only as good as it is, the connections where they can connect to the outside world. And if you give me a moment here, I want to read a quote from a Genesys executive, which said or who said, "Sinch acted as the central nervous system or critical link with robust voice services and all communications channels to bring the solution to life where others had failed in the past." And the reason why I read that quote to you is because this is exactly who Sinch is. We are the trusted infrastructure for communications channels, whether it be voice, messaging or email.

So Voice Relay. How do we make voice AI actionable? And if you think about where we stand in this transformation, this technology transformation that we're experiencing currently, you know that most AI work is text-based today. You've probably seen some of the reports and lots of the articles that come out to say that, is AI really real? Is it really going to deliver for enterprises? There's a lot of pilots that never make it into production, and they call it AI purgatory. We actually don't see it as that. We actually see quite a lot of pilots moving into production. But what we do see, and we've done this research, is we see 3/4 of those production deployments having to be rolled back because they're not effective.

And the reason half of those are being rolled back is because the communications infrastructure that they've deployed this AI on is not purpose fit for the real world. Why is that? The world is complicated as it relates to communications. They -- no matter where you are in the world, you have regulatory requirements, you have compliance requirements. You have lots of carriers to negotiate and deal with and all of their technology is complicated. So Sinch has built an infrastructure that is well poised to be able to support any enterprise who wants to deploy AI in their ecosystem.

So today, AI is mostly text based. However, voice continues to be an extremely critical vital channel for enterprises to be able to communicate to their customers. But voice is complex. And quality matters, latency matters. Now I want to explain to you exactly what Voice Relay is, but rather I think we should just show you a demo so that you can see it in action.

[Presentation]

So what you just saw there was a great example of how AI is really kind of changing the world in which we live. And before I hand over to Jonas, I just wanted to say that Sinch is giving AI a voice, in that example, in that demo that you just saw. AI is changing the way the world communicates. Sinch is extremely well positioned to be able to take advantage of that. We have been building infrastructure for the last several decades to be able to be ready for this point in time.

The example you just saw is the voice infrastructure. But what you also started to hear in that demo is the fact that context matters, latency matters, quality of service matters, the ability that Sinch has across all of our channels of communications, not just voice, but across messaging as well as email carrying that context through is an incredibly important capability for enterprises to be able to deliver the experience that they need to deliver to their end users.

So with that, we're giving a voice to AI. Jonas, let's talk about the financials.

Thank you so much, Laurinda. So exciting times, Sinch powering the world of AI communications. And let's talk about what you think is a very solid quarter. So starting on top line, we're returning to organic net sales growth, which we are very happy about, 3% year-over-year organic. In addition, what we have, which is very solid, is an acceleration of our organic gross profit growth to 5% in the quarter. And the engine behind this is really Americas, both on top line and on gross profit growth. So we're going to talk more about that.

And it is voice. It's our innovative voice offering that also contributes significantly to the GP growth. Now,, no surprise to anyone. Everyone in this quarter has a lot of FX headwinds and so do we, given our exposure to the U.S. dollar and the American market. So in the quarter, we have actually FX headwinds of 11% on sales and 13% on gross profit. But we're going to focus on the organic numbers. So that's the underlying strength of the business.

All right. Let's talk about the regional performance. Again, the engine is Americas with 65% (sic) [ 63% ] of the gross profit in the quarter. And on top line here, really, what's strong is the API business. The API business grows double digit. And the API business is what connects us with our customers' applications and if it's a partner, their customers' applications, and increasingly, this is where you will see AI natives and AI applications connect with Sinch.

So 10% top line growth coming from API in Americas, very strong. And then looking at GP 7% growth in the quarter for Americas. And here, we see contribution from all product categories, but in particular, we see very strong growth from the network voice business. And this is driven by a bit of growth, but most importantly, we're shifting transmission technology from legacy TDM to IP, and this provides significant cost savings.

Also, what contributes in the quarter to the performance are wins from last year. And we were very happy about the wins we also have this quarter. It's in all relevant and important sectors. It's tech, it's financial services, it's retail and it's health care, as Laurinda mentioned earlier. And with those wins, we also are looking forward to continued positive development for Americas in combination with continued rollout of IP technology.

Looking at EMEA. This is 22% of gross profit. It's really a story about profitability. Yes, we see a slight decline due to continued phaseout of these fixed priced operator contracts. But on a sequential basis, it's actually stable. So it's more the comps. And we expect this to be stable going forward, even though you can never give any guarantees. And combine that with the positive development we see in applications and also we have a new leader here, Jonathan Bean, that will reposition EMEA for growth. We're also confident about the future development for EMEA.

Moving on to APAC. Here, we have a decline on net sales of 5% organically and 10% in gross profit. This is predominantly about India. Tough market. And in addition, we have a revenue adjustment due to a dispute with a client of SEK 20 million, which trickles down, of course, revenue GP and all the way down. We also have a bit of an impact on operator costs in the Application segment in Australia. But also when it comes to APAC, we think it's a very stable business, with some challenges in India.

Now looking at India, it's worthwhile remember that India is a low single-digit percentage of the business. So the downside for the group still is limited. So looking ahead, we are positive about the full year outlook. We've said that we expect the second half to be stronger than the first half. And we believe that because of the momentum we see in the Americas with the contracts that we just won being ramped and continued development of this shift into IP technology that will support profitability. And also some of the comps that we've had both in -- difficult comps we have in both EMEA and Americas rolling off. So that was regional performance.

Let's look at overall profitability. Group gross margin essentially unchanged compared to last year, a slight sequential drop. And this is a combination of a positive development from Americas, predominantly the voice business with the technology shift and lower cost and FX headwinds, which are transactional. And this is worthwhile talking a little bit more about because we usually don't mention our transactional effects because they are minor. But if we have material and also rapid movements in FX, we may have also transactional effects. This comes from revenue in U.S. dollar and contracts priced in U.S. dollars where we have traffic costs in other currencies, predominantly then, of course, for our American clients. And this has an impact on gross margin in the quarter of 0.8 percentage points.

But overall, a stable gross margin, and that also then trickles down to a stable adjusted EBITDA. We're going to talk more about EBITDA in a bit. But what's positive here is you see an uptick in unadjusted EBITDA since we have lower adjustment items and that elevates the unadjusted EBITDA margin. So quite tight now between adjusted and unadjusted EBITDA.

So let's look closer at the cost development and EBITDA development. And again, lots of FX here. So we're going to talk about the organic numbers. And what you can see here on the left-hand side is very disciplined cost control and adjusted OpEx increasing below inflation. And this is due to a combination of lower G&A costs, but some reinvestments of those cost reductions into growth. And what I mean with that is investments in sales, marketing and product development.

And if you combine this disciplined cost control with the gross margin -- gross profit expansion that is, we have a very nice pop to organic adjusted EBITDA, which is up 10% in the quarter.

And as I said, we also have lower adjustment items, most importantly, lower adjustment items on transformation costs. And what we mean with that is integration and restructuring costs, which is down 60% in the quarter, and hence, unadjusted EBITDA is actually up 18% organically and the nominal numbers actually beating the FX effects. So also nominal numbers are up here, which we think is very positive.

All right. Let's talk about cash flow. Cash flow in the quarter, positive, plus SEK 375 million. And we are very happy about that. Typically, Q1 is seasonally challenged when it comes to cash flow, in particular, given the strong cash release we had year-end, this is strong. And this provides a positive development also to cash conversion LTM, which is now at 54%, which is ahead of our guidance and ahead of the average over the last 4 years that has been 50%. So positive development on cash flow.

Working capital within normal variations. Net working capital essentially 0. So that's very positive. What I want to remind everyone about is that working capital may swing. So you may see a quarter or so where we have some working capital swings impacting cash flow. But then I want to remind everyone about this very solid and consistent cash conversion over time.

So with solid cash flow and a strong balance sheet, you can repurchase shares, and that is what we have done. Since Q2, when we initiated the share buyback program, we have repurchased 15% of the outstanding equity. And in addition, we have also through a swap agreement, repurchased a bit more to the LTIP program we have to not dilute shareholders. So in total, outstanding shares is down 16% in a few quarters. And this is obviously very positive for shareholders, we believe.

And what you can expect now going forward is continued share buybacks, but the Board does not want to push leverage any further. Even though we are clearly within our financial target of net debt-to-EBITDA being -- should be below 2.5. We're at 2.0 right now. And we have sufficient liquidity available for more buybacks. We don't want to push leverage further, but you can expect buybacks to happen in line with free cash flow, maintaining leverage if the Board believes that it's in the shareholders' interest.

Now lastly, before handing back to Laurinda. Sinch was listed 2015. We now have 10 full years of performance and it's worthwhile reflecting on that performance, and it's a very positive story. So looking at adjusted EBITDA per share, we have returned on average 29% since IPO, which we are very proud of. And as you can see, this is a combination of organic growth and the major acquisitions that happened. We had a couple of years of integration and consolidation, but now we're back to growth. And with the buybacks we have done, this also gives a very good kick to adjusted EBITDA per share. And adjusted EBITDA per share is up 15% on an LTM basis. But as Laurinda started, there is significant FX effects in this as well.

So in fact, if you adjust for the FX effect, we have an increase of the EBITDA, the adjusted EBITDA per share with 27%, which we're very happy about, and it's line with historical average.

And with that, Laurinda, welcome back.

Thank you, Jonas. Appreciate all that good detail, fine detail. Before we open up for questions, I wanted to quickly summarize. And that is that Sinch is in an extremely strong position. I mentioned earlier in this world of AI, conversations are changing. And the way in which conversations happen is changing. What's important in those conversations is changing Sinch is the infrastructure, the trusted infrastructure to be able to enable all of those conversations and those communications.

We have momentum. We have a clear strategy. We have a strong leadership team. And I think that we also have a significant opportunity ahead. We have structural tailwinds that we plan to take advantage of.

So with that, we're in a good position, and I'm very pleased to be able to talk to you today and take your questions here with Jonas.

Thank you very much, Laurinda. Thank you, Jonas. It's time for questions. [Operator Instructions] So let's start. Let's see who we have first on the line. We have Erik Lindholm-Rojestal from SEB.

So I just wanted to start by asking about the improvement in network connectivity. How much of this is sort of driven by the switch to IT infrastructure? And how much would you say is driven by better demand around voice? I'll start there.

Yes. I'll let you go through the particulars. But I would just say that it's both. That's the easy finite answer. The reality is we've been working on this network transformation for the last several years. It's been an important part of our strategy to ensure that we generate cash out of that asset. And in addition to that, we now find ourselves where voice is, dare I say s*** again. And what I mean by that is, again, voice is a critical and complex channel and it is incredibly important in the communications to customers at the end of the day.

If you look in the quarter, the improvement is a combination, but it's predominantly from the cost savings. However, what you'll see going forward, given some of the wins we've had is also actually continued growth in the voice business. So the services we provide within AI voice and enterprise voice, they get consolidated into the Network Voice segment, even though it's more than the traditional voice service.

Right. Great. And as you said, I mean, voice really picking up interest here as Twilio is showing strong growth in that segment as well. And I just wanted to ask, I mean, you spoke about Voice Relay at length, and it's an interesting product. I mean, have you seen any customer wins on that specifically already now?

It's a new product for us, Erik. So we don't have anything to announce at this moment in time, but we do have a lot of interest from the enterprises.

Okay. Great. And then just on the contract signings in the U.S., several new significant contracts as you said. I mean, what is the key driver here already in the quarter? Or should this, sort of, contribute more in the coming quarters?

Yes. So the deals that were signed in the first quarter actually had very little impact on the financial results in the first quarter. So those are forward-looking. And as Jonas said, we do see that contributing to the go-forward growth.

All right. That's great. And maybe a final question for me. I mean, Twilio mentioned RCS doubling near sequentially in Q1. So what share of your volumes comes from RCS now? And do you feel like there are, sort of, incremental use cases that are being launched around RCS? Or is this mostly cannibalizing on SMS volumes?

Yes. No, also a great question. And we didn't spend a whole lot of energy today talking about RCS and we have in the past. We are very bullish on RCS. We continue to be. We think it is a really important capability as conversations change and become more advanced in this world that we find ourselves in. The volumes are low, though, in comparison to our overall messaging volume. So it's not something that we could report on to say it's any material impact yet. However, volumes continue to increase. We're continuing to see new use cases. And interestingly enough, we're starting to see more traction in the U.S.

In the commercial momentum slide, though, we specifically called out with an Asian hyperscaler e-commerce company where we're deploying RCS for them in other parts of the world. So it's very geographic based at this moment in time, but we're seeing traction start to build.

And let's look at the second one in line. There is Daniel Thorsson from ABG.

Okay. Perfect. So just the first one to Jonas here. You said the outlook for the second half is to see a stronger growth than in the first half. Is that the organic GP growth you referred to, I guess?

Correct.

Perfect. And then I have a question on investments and OpEx here. Given the solid growth momentum and tailwinds in the market, you elaborate on here very well. Do you think that we will see OpEx expansion in a different way today, like we are seeing a return to growth mode again and maybe headcount growth in the latter part of 2026 or potentially into 2027. Or do you see that you can scale the current organization meaningfully before that is needed?

What we've said, and we will stick to this is that we are within our profitability targets. And we will prioritize growth ahead of further profitability improvements. So yes, we may invest more in OpEx to further stimulate growth. Having that said, we're turning and we intended to be as efficient as possible. So we will maintain a very disciplined cost focus.

Okay. That's clear. And then the final one on M&A opportunities. You have been very active on buybacks here, obviously, but now you're up to 2x leverage and you say that you don't want to go above 2.5x, and we also have a change of CEO in the coming 6 to 9 months. Should we expect muted like M&A discussions with potential targets? Or are you doing that work in parallel at equal pace as before?

No, we continue to look at M&A opportunities. Again, if we execute on M&A or buy back our share is very much depending on what we think is best for shareholders and obviously, what's best strategically. So we're ready to execute on bolt-ons. And when it comes to more transformational deals, they come when they come. You can't really just time them at your own discretion. It requires two to tango to make that work. But we're definitely looking at M&A as well.

Okay. I see. That's clear. And maybe if I can take the last one on the Americas. You said around year-end or in Q3 that you saw price competition in terms of like traditional SMS volumes in the Americas. Has that faded? Or is that behind us now, given the solid growth rates you report?

I think that is honestly a misunderstanding from earlier. What we said was or what happened was we had one particular customer loss. And maybe we used the wrong language around that. And that is what leaves us from the comps starting now at Q2. And what we see is a fairly stable development when it comes to the price levels actually.

Thank you. Let's take the next question. Then we have Thomas Nilsson from Nordea.

With fixed price operating contract headwinds and now said to have limited downside, what needs to happen for EMEA to return to positive gross profit growth?

So quite frankly, the first is just to make sure we have stability in this fixed price operator contract. And 2/3 is gone. It's only 1/3 of those contracts left, and we see stability. And then with the commercial momentum we have in EMEA, we expect EMEA to return to gradually to modest growth coming quarters. And then we have a very strong position in EMEA. It's our home base. We have a strong market share. So we're also confident when it comes to EMEA, but it takes some time to build that momentum. Jonathan is new, and again, we're positive about it.

Very positive. And I would say, yes, Jonathan is new in the role, but Jonathan is not new to Sinch. He's been here for 7 years as our Chief Marketing Officer before this role. He knows this industry extremely well. He's well known in the industry, and he's well known in the market. So he was absolutely the right choice, and he is coming into this position with a tremendous amount of urgency and energy. And he's actually in market right now meeting with his teams and with customers. We believe that there's a lot of opportunity here in the market, and we're excited to see him in action and delivering results for us.

And one final question for me, if I may. You are well known to be bullish on RCS. Could you talk a bit about your expectations for gross margins for RCS as compared to traditional SMS, even though RCS are small volumes but growing.

Yes. I think our expectation on margins is what we've always said, which is the traditional SMS replacement in RCS, the margins will shift very much at all. What gets exciting with RCS is when you start to move into the 2-way conversations, the rich media, the more complex use case, particularly as it relates to marketing, that's when margins will expand.

We see that position happening geo-by-geo or geography-by-geography. So we have a lot of traction in Brazil and India, as an example, because those consumers are very used to interacting through these sorts of channels to do commerce through these sorts of channels. It's slower uptake in some of the other markets like the U.S. So right now, RCS in the U.S., I would say, is probably more of a one-for-one comparison to the traditional SMS margins where we have it in other places that are in the higher kind of value aspect of RCS. We do see a bit of a higher margin.

I think we're going to take the next one then. And this is Daniel Djurberg from Handelsbanken.

Sad to see you leave, Laurinda, but glad you will stay on for a while at least. I would like to start on asking, I know it's a tricky question perhaps. But you have organic growth in the API platform also in Americas, driven by messaging and email business, you're right. But is it possible to give a ballpark range of this underlying FX adjusted organic growth in Americas with regards to the API platform, if you adjust for this large customer that -- and also, when should we expect this to be annualized the effect of this customer?

So are you referring to the loss we had in Q2 last year, leaving with comps? Is that one?

Yes. Yes, yes. And yes, you're right about this. So I guess, Q3 will this be in fully out. But is it possible to give us some kind of range or whatever on the growth itself underneath this?

Yes. It's -- what I can say, it's a meaningful part of the API business. So I don't want to give a precise number, but we're talking a couple of percentage points at least.

That's good to know. And with you, Jonas also, I would like to ask about the provision for the taxes, it was SEK 700 million made in the Q4 '24, I think. I think, you utilized some SEK 33 million in the quarter, but you will have some SEK 200 million for this year or for the coming 12 months, I guess, and some SEK 468 million left for further ahead.

So first and foremost, will -- should we expect the similar phasing in on a cash flow perspective on -- as we have seen so far? And will this SEK 199 million hit the full cash flow in '26? Just to understand the cash flow impact.

Yes. Quite frankly, this is very difficult to estimate when this will happen and also to what extent it will happen. What we believe is that the provision we have on this tax item is sufficient. But this relates to a fairly complicated indirect taxes in a global environment. So timing and exactly where this will land is uncertain, but we're confident that we have a sufficient provision.

Super. And so we shouldn't expect any reversals at least so more that it's sufficient to SEK 700 million in total still. Yes?

So reversing this will happen if we have more clarity, and we don't have that clarity. If the reversion is there.

Yes. And I will ask the last question to Laurinda then on your part of the Ericsson Aduna program resulting network APIs functionality. Early days, obviously, but my question is, do you see any progress so far in this reseller business of new standardized network APIs available so far?

So we believe in network APIs very much so, particularly the transition around verification specifically. As it relates to the specific partnership and agreements that you've called out, I would say we see limited traction.

Let's go to the next one in the queue. And that is Predrag Savinovic from DNB at Carnegie.

Sorry to see you go, Laurinda. Congrats to everything you achieved at Sinch and best of luck to your future endeavors as well. I also wanted to ask a few things about the contracts you announced today. So I think historically, when you land a larger deal, the ramp-up phase is typically quite long, at least 12 months. But here, it sounds like this is going to go quite quick. What is different this time, would you say?

I think it actually ranges, Predrag. I think to your point, we've had slower ramp-up when we've had large, large messaging deals. Part of the transformation that we've been going through over the last couple of years has had a focus in on time to revenue, meaning how do we put policies and process and tools or systems in place to accelerate the revenue recognition and the actual time to value for customers. There's still plenty of opportunity to grow there. I won't claim victory entirely on that, but we have made progress. And so we're definitely better today than we were a few years ago. That being said, there are other parts of the business that do turn up much faster. Email is a good example of that.

In the smaller end of the business when we have large customers, we have to soak it in. So again, I would say it's a range. Our point earlier when we called out the fact that this commercial momentum will have a meaningful impact in the second half of the year. It gives us that flexibility, right? We still have 7 months, I think, left in the year. That gives us flexibility to fully ramp those customers, but it ranges.

All right. And how were they sourced? Have these customers, for example, been customers on the messaging side before? And has this helped you win those deals based on historic collaborations and so on?

Sure. So the wins on that page or that slide, talk about 3 different variations. One is new customer wins, so there are new logos, new relationships to Sinch. Then there's the expansion with existing customers, and then there's a third category through partnerships. I called out the IHG deal very specifically because that's a partnership deal with Genesys.

But really, why we have traction in the market is because of the go-to-market transformations that are finally starting to execute. Last year, when we talked about -- well, I'll go back even 2 years ago when we started this process, I talked about the pain in the system because we're bringing together multiple organizations. We moved from 7 or 9 CRMs, if memory serves correct, to 1 now. So there's been a lot of integration and transformation on the go-to-market side.

And so last year, I started speaking about pipeline and some green shoots or some leading indicators. What you're seeing now is that actually translating into revenue and gross profit.

Very good. And then on the sustainability of organic growth in the Americas. Can you elaborate a little bit on that, considering how well you do now, at the start of Q1, our '25 progressed? One thing to be potentially cautious about would be growth pains then.

Yes. We have big ambitions. And as does the market leader and her team, they're really pushing themselves to do more. A couple of things that give us confidence. Number one is certainly the trajectory into Q1. Q1 results is as a result of deals and execution in the second half of last year. The new wins in Q1, which have not shown up in revenue and gross profit yet, but will by the second half of this year.

The other piece that Jonas has called out a few times here is there was a big negative last year in the Americas because of this 1 customer loss that we had in the second quarter. That will disappear from the comps in mid-second quarter. So certainly, by third quarter, it's completely out. So that -- those are really the aspects that give us confidence.

And adding to that, when it comes to growth pains, I mean, we have a very scalable platform. So I wouldn't expect growth pains.

We have many questions today. Let's see who it is next. That is Viktor Högberg from Danske Bank.

So I was wondering, given the momentum and cost optimization, could you just help us with your expectations about the group gross margin trajectory over time, not just this year but, say, 3 to 5 years out versus the current level?

Yes. That's a good question, and I wish I had a precise answer to that. So what I can say is, if you look at last year, we had gross margin expansion because of mix shift towards, in particular, email, which is a very profitable product for us. I expect to see further gross margin expansion. Now we have a temporary setback because of FX, and that is an unknown swing factor, of course. But we are positive about gross margin. So I guess that's what I can say. But it is a little bit of a million-dollar question as well.

Okay. We're running out of time. So we think we need to take the next one. We have on the phone telephone queue here. And that is Deepshikha from Goldman Sachs.

I think a lot of the questions were already answered. Just one on APAC. I think obviously, there's been like the thing on SMS called out in India and then APAC also there have been pricing pressure. So please, can you just give more details around the dynamic in that region. And as the comps get easier, through the year, how should we be thinking about like the growth progression in this particular region?

Yes. So there are 3 parts to APAC. It's India, it's Australian Applications business, and then it's basically the rest of Asia. So let me pick that apart.

So India is tough. And -- but India is low single-digit percentage of group gross profit. So whatever happens, the impact on group will be limited. We are working to turn around India and put India back, firstly, to stability and then to growth. I mean, India is an amazing market. It's 1.4 billion inhabitants, 1.1 billion subscribers. So we want to be in the game, but it is a competitive market.

When it comes to the application business in Australia, we've had increased traffic cost. We don't expect that going forward. So that what hits the GP growth. We have a very strong position in this business, but it's not really a growth engine where we see most growth is in the API business in rest of Asia, basically. Now that had a very strong growth last year. We've had a bit of volatility in that, but we believe that's where you can expect growth going forward.

Thank you. We have a few minutes left. A few questions from the chat about fixed price contracts. Can you quantify what the residual headwinds is? And what do you expect the region to return to -- when you expect the region to return to positive growth in EMEA?

So the fixed-price contracts in EMEA is around 10% of EMEA now, the remaining part, and we believe that will be stable. So that translates also to low single-digit numbers of total group GP. I don't want to give a precise outlook on when EMEA will be back to growth. But we have wins, and we have stability in the rest of the business. So we will see growth eventually.

Good. And the last question we have time for today is to Laurinda. Why are you leaving Sinch?

Listen, I've thought very deeply about this. And I think it's important that businesses, teams, they require different leadership for different points in time. And over the last 3 years, I believe we have delivered on the mandate that I was given, which was to stabilize the business, to integrate the business and through make sure that we are profitable and return to organic growth. We've done those things.

And I'm extremely grateful and proud, like I said earlier, to the Sinchers, as we call ourselves, to the Sinchers around the world. I think people have worked very hard to move from a lot of stand-alone silos to One Sinch. They've worked really hard and taken sacrifices to protect and improve profitability and deliver our highest profitability.

And you can see today that we've reignited organic growth. And so it's a fantastic platform. We've built the foundation and the next leader is going to be able to build off of that foundation and take Sinch to the next level. And I'm excited to be a part of that journey. I'm fully supportive while I'm here. And while I'm not here, I'll be the biggest cheerleader for the organization on the sidelines. But it has been my honor to be a part of this journey.

Thank you, Laurinda, for your fantastic contributions and leadership. And thank you, Jonas. It was what we had time for today. We will be back here for the Q2 earnings presentation. It will be 22nd of July. If you have questions, feel free to reach out to me and IR department. We are very happy to help you. Thank you very much for listening in, and goodbye.

Hello, everyone, and very welcome to Sinch Q4 2025 presentation. My name is Mia Nordlander, and I'm Head of Investor Relations and Sustainability. And with me here in the room today, I have our CEO, Laurinda Pang; and our CFO, Jonas Dahlberg.

So today, you will hear Laurinda and Jonas present the quarter and thereafter, we will have time for questions.

[Operator Instructions] So once again, very welcome, and I hand over to you, Laurinda.

Thank you so much, Mia, and thanks, everyone, for joining us today. 2025 was a year of disciplined execution where we achieved record high profitability while regaining our growth momentum. The fourth quarter marks a strong finish to the year, and I'm pleased to report another period of continued organic gross profit growth and improved profitability. Let's turn to Slide 2 to look at the highlights from the quarter. The fourth quarter shows that we are firmly on the path to regained growth with solid momentum in our largest businesses, the Americas and our API platform, which was partially offset by headwinds in EMEA and APAC. We are closing the year with record high profitability.

Gross profit grew 3% organically, and our gross margin expanded by 2 percentage points to 35%. Combined with our disciplined cost control, this resulted in an adjusted EBITDA margin of 14%, an increase of 1 percentage point year-over-year. And our cash conversion for the quarter was a solid [ 84% ] Finally, we continue to return value to our shareholders. We have now repurchased 8.8% of our outstanding shares, and we have called an Extraordinary General Meeting later this week to seek approval for canceling these shares. This cancellation is a strategic step as it will enable the Board to decide on additional buybacks within the 10% limit until the 2026 AGM.

Please turn to Slide 3. Our performance this quarter and throughout 2025 is a direct result of our strategy built on 3 pillars: reaccelerating growth, expanding our EBITDA margin and active capital allocation. Our focus on healthy product mix, commercial discipline and operational efficiency is driving our progress, and we remain firmly on track to deliver our midterm financial targets. Now let's look back at the full year on Slide 4. When we put that strategy into perspective, you can see on this slide that 2025 was the year our disciplined execution has placed us on a strong trajectory toward our midterm goals. We achieved exactly what we set out to do.

We rebalanced regaining our growth momentum while simultaneously delivering record high profitability. This performance was powered by solid development in the Americas region and in our API platform products. I'm pleased with the progress we are making towards our key financial targets. And in fact, with an adjusted EBITDA margin of 14% this quarter, we have already reached our target range that we set for the end of 2027. With gross profit growing 4% organically year-over-year, we are firmly on our way towards our 7% to 9% year-on-year financial target for the end of 2027. And we continue to be focused on building a resilient and sustainable business through diversifying our customer base, winning in next-generation messaging and e-mail as well as improving our commercial terms, which supports top line revenue growth and continued profitability.

Also, our performance is being recognized externally. We were named a market leader by both IDC and ROCCO. For the third consecutive year, Gartner named Sinch a leader in its "Magic Quadrant Leader for CPaaS," which is a powerful validation of our global reach, competitive position and consistent platform leadership. On Slide 5, you can see our progress on our growth priorities. Our progress is anchored in a clear strategic framework built around four growth drivers. I will briefly touch on each of them here and then go deeper on selected areas in the following slides. The foundation of predictable, high-quality growth comes from four core drivers, as I mentioned.

Our enterprise customer base grew a consistent 5% with leading brands such as Google and Albertsons among the top contributors to gross profit growth. At the same time, our high-margin self-service products delivered another stable quarter of 10% on a year-to-date basis. Building on this stable base, next-generation messaging is an important growth driver. Adoption of RCS continues to increase with volumes growing 260% year-over-year. Customers, including PayPal and OneMain Financial ranked among our top 10 customers by volume in the fourth quarter. Finally, we are expanding our partners and ecosystems channel, which serves as our strategic gateway to the AI economy. This includes signing new innovative AI partners such as Lovable. In parallel, we are also deepening relationships with established global leaders across our ecosystem. A strong example is Adobe, where we closed several significant deals in the fourth quarter.

Now let's look closer at the quality of our enterprise customer base on Slide 6. This chart clearly illustrates a key strategic achievement. We are building a more diversified and resilient customer base. Growth is increasingly driven by a broad set of enterprise customers beyond our top 10. This deliberate shift reduces our exposure to highly competitive, lower-margin traffic and is a key driver behind our margin expansion and improved earnings quality. At the same time, it's important to note, though, that this is not a story of substitution. We continue to maintain our strong and stable position with some of the world's largest CPaaS customers who rely on our global network and platform for their communications. We are simply layering on new high-quality growth.

Let's turn to Slide 7. Our market leadership is now translating into strong and accelerating commercial momentum, particularly in our largest market of North America. This is not a coincidence. It's actually a result of the deliberate changes in our go-to-market strategy and operations that we put in place last year. Those changes were focused on creating a more disciplined, accountable and effective commercial organization. We started by aligning our entire commercial team around a segmented operating model to focus our resources on the highest potential customer tiers. This strategic alignment was underpinned by true operational rigor, including a significant simplification of our job architecture to create clearer roles and accountability. That structural clarity is brought to life by a culture of high performance.

We radically streamlined our sales compensation plans, which have directly led to improved quota attainment and integrated tools like our new CRM to establish a disciplined data-driven business cadence. The results of this transformed approach are clear. In the fourth quarter alone, our team delivered significant wins, including securing a 7-figure multimillion-dollar deal with a leading HR software company. Expanding our partnership with a leading hotel chain to over 100 countries and landing a 7-figure voice deal with a large U.S. health insurer. These are not just isolated victories. They're actually proof points of a strategic transformation that is delivering sustainable, high-quality growth.

Let's turn to Slide 8. Our leadership in next-generation messaging is a key pillar of our growth and nowhere is this more evident than with RCS. We are at the forefront of a major technology shift with our RCS volumes in the fourth quarter increasing by 260%. The driver is simple. RCS delivers better outcomes because it changes what messaging can do. It turns one-way notifications into rich interactive experiences that can generate up to 10x the engagement of standard SMS, translating into higher conversion rates and stronger ROI for our customers. But here's the most exciting part of this for us. Despite this incredible growth, RCS still accounts for only 3% of our total messaging volume. We are in the early stages of a multiyear technology shift and capturing this transition from SMS to RCS is a significant and durable growth tailwind for Sinch.

When our clients see a step change in engagement, they don't just send more alerts. They create entirely new conversational journeys. This expands their total interactions and spend on our platform, delivering -- driving revenue growth. At the same time, enabling these higher-value interactions embeds us as a strategic partner, and that strengthens our customer relationships, reduces churn and increases lifetime value. Let's turn to Slide 9, please. Our strategy for winning in the AI economy is built on a proven playbook. Since our founding, Sinch has been the communications backbone for the major technology shifts from mobile to the cloud. And we are a key part of the tech stack for leaders in each of these eras, and we are now the indispensable backbone for the AI era. We are the trusted execution layer within the AI ecosystem itself.

We are embedding our technology with both established AI leaders and on platforms like our new partner Lovable, where the long tail of new AI native businesses is being born. This strategy creates an incredibly efficient growth engine. It allows us to capture the next wave of agent-driven communication volumes at its source, building a durable strategic moat for the decade to come. We are ensuring the next wave of global innovation runs on the Sinch platform. So as I hand the word over to Jonas to take you through the financials and details, let me summarize quickly. We have delivered a strong year of profitable growth as a result of delivering value to our customers and partners and by executing with discipline. We're confident in our strategy and our ability to continue creating value for our shareholders. Thanks for listening here today, and I look forward to taking your questions shortly.

Thank you, Laurinda. Without further ado, let's get into the numbers. So let's flip to Page 11. So as in previous quarters of 2025, we faced strong FX headwinds in the fourth quarter, actually pronounced headwinds. And the negative FX impact was minus 10% on net sales and minus 11% on gross profit. Adjusted for FX, we have a reduction on organic revenue, mainly driven by reduction of low-margin contracts. But combining this also with a positive mix shift, this yields a continued positive organic GP growth of 3% in the quarter at a similar level to the 4% average we've had throughout the year.

The Americas is the engine. So let's look at that in more detail by flipping to the next Page 12. So Americas is our most important region by size. It's more than 60% of our gross profit and is the group's growth engine in the year and in the quarter. Americas delivered 7% gross profit growth with a 3 percentage point increase of the margin to 36%. And what's also great to see is that the largest business we have in Americas, the API business with enterprise messaging and e-mail is the main contributor to growth. The growth in the API business was strong and outpaced the decline we've seen in verification with e-mail and messaging.

Also, network connectivity shows stable underlying performance. What's important, though, to understand here about network connectivity is that in Americas, we had a hit on the revenue of approximately SEK 60 million related to a traffic dispute with a customer. At the same time, we have a positive contribution from almost the same amount, completely unrelated in API platform related to traffic fees from a supplier. Combining these 2, the effect on Americas gross profit and group gross profit is nil, but you will see some movements between the segments. Moving over to EMEA. We see strong growth in applications. Also the core part of API messaging grew strongly, but we continue to face headwinds from the fixed price contracts in EMEA.

These contracts are being phased out to -- well, material being phased out. And as of the end of the first half, we expect no impact from continued phase out of these contracts. In APAC, we have strong growth in the API business, except continued decline in India and also some competitive pressure in Australia. So it looks like a mixed bag, but the important takeaway here is the most important business we have, which is on a regional level, the Americas, and on product categories being the API business in e-mail and messaging, they are doing very well. So let's flip page and look at what's happening on margins. It's actually a record high delivery. We have continued improvement of margins in the quarter. We have strong gross margin of 35% and for the year, the highest gross margin and EBITDA so far.

We've already covered actually most of the important drivers. It's about the mix shift on product level and reduction of low-margin contracts. And combined, this drives this very solid and continued gross margin expansion. On the EBITDA margin side, also what contributes is disciplined cost control and continued synergy extraction. Real quick flip to Page 14 to look at the cost development. So here, the nominal number shows actually a decline of OpEx with 8%. But also here, we have FX effects at play. But if we adjust for the FX effect, we still have a very disciplined development of cost with only a 1% organic increase in OpEx. Combined all, we have an organic growth of EBITDA -- of adjusted EBITDA of 6%. And we have an even higher improvement of non-adjusted EBITDA. What we have here is last Q4, a SEK 700 million provision on indirect taxes in the fourth quarter.

Moving over to cash flow. That's on Page 15. Super strong cash conversion, seasonally strong quarter, 84% cash conversion. That's free cash flow of SEK 1.5 billion over the last year, and that's a 40% cash conversion. It is within our guidance range of 40% to 50%. Important to remember, last year, we had 60% cash conversion. Now it's 40%. If you look over time, our cash conversion is 50%, but we have some working capital swings. And you can see that in the cash flow on the right-hand side of this chart. But just to prove the point that you shouldn't be concerned about this. It's more normal swings. We turn to Page 16. As you can see, working capital here, net working capital is still in a favorable position. That means we have a negative working capital. And what you see here in the quarter is a seasonal increase in payables that contributes to a positive cash release. So in a nutshell, some swings between quarters, but truly continued solid working capital.

Turn to Page 17, looking at leverage. We're still at a solid 1.6x leverage. This is a slight increase from the trough in Q2, driven basically by the share buybacks we've done. We bought 62 million shares during this period for close to SEK 1.9 billion. And in addition, we bought shares through an equity swap arrangement of SEK 364 million on top of that. Still have SEK 3.7 billion available in use in credit facilities that we can use for general corporate purposes such as buybacks. Now to the topic of buybacks, move to Page 18. So back to our strategy, it is to have an active capital allocation strategy. And we have returned cash to shareholders through the buyback program. So in the 2025 AGM, we got a mandate from the AGM or the Board got a mandate from the AGM to buy back 10% of the shares, and that started after the report of the second quarter. Then we have stepped up treasury shares to first 1.8% end of Q3 to 7.3% at year-end. And currently, we hold 8.8%.

And with this background, the Board of Directors have convened an extraordinary general meeting for shareholders on Thursday, to vote on the cancellation of the existing treasury shares and a positive vote would enable an additional 10% buybacks until the ordinary AGM in May. And the question is obviously then how much shares can we buy back. I'd like to first be clear that the Board will, at every point in time, decide what they think is in the best interest of the shareholders. So this is more an illustrative example. But we've had an average free cash flow conversion of 50% over the last few years. And with the current situation, we can easily buy back 10% of our shares per year. Add on top of that, our current GP growth rate and our existing margins, we can more than double profit per share in 5 years. And this is what I would call the bedrock case for Sinch. On top of that, obviously, as we step up towards our organic GP growth target, this can be even more favorable. So with this background, the Board of Directors believe it's in the shareholders' interest with flexibility for accelerated buybacks.

So just before we open up for Q&A, just to remind you about our strategy on Page 19. We will continue to execute for growth reacceleration, continue working with our profitability within the target range and then active capital allocation, including share buybacks. And with that...

Thank you so much, Laurinda and Jonas. [Operator Instructions] First, I have Erik Lindholm-Rojesta from SEB.

I'll start with two here. So you have highlighted sort of several headwinds to growth, most of which seem to have been present already in Q3. But I mean, from your point of view, is there really anything new in terms of headwinds that started to impact here in the quarter? Any changes in the sort of competitive intensity? And then secondly, I just wanted to ask sort of on the AI part. Twilio seems to be having a solid acceleration in AI use cases and AI customer intake, particularly around voice. I mean, have you seen any sort of impact, increased customer intake or increased usage from AI agents here?

Erik, this is Laurinda. Thanks for the questions. First of all, with regards to headwinds, we don't see anything new to your point, which is correct, we did call them out in the third quarter, and we saw them again in the fourth quarter. We also said this morning that we expect similar trends in the first half of this year in terms of the headwinds, but we also see the momentum continuing in both the Americas and API. So very similar to the second half of 2025. With regards to the AI use cases, we made the announcement with regards to Lovable being a strategic partner -- and it is just an example of the use cases that we are both pursuing as well as winning.

We've established an AI partnership team that we are deploying around the world to pursue these partnerships so that we can natively integrate with these AI native companies, both in terms of the LLMs as well as those who are building platforms to enable other AI native companies and applications to be created. And so we're very optimistic about this opportunity. And the reason being is because we believe that we have the exact right infrastructure and capabilities to execute in this AI economy.

Agents, to your point about the agent use cases or agents really proliferating and exploding customer communications, we agree with that sentiment, and we do see communication volumes starting to increase. And we believe that we have the appropriate channels of communication at scale in a trusted environment to be the best poised partner for those AI companies.

All right. Excellent. Just one follow-up, if that's all right. Just on the gross profit growth that you mentioned there, just quantifying what you said, is it fair to say that you see sort of -- you see similar growth as in H2 now into H1 on gross profit?

Yes.

Okay. Next one, we have Laura Metayer from Morgan Stanley.

Three questions from me, please. On the network connectivity business, was the weaker organic growth only due to the customer dispute? Or was there anything else to call out this quarter? Second question on the midterm organic growth targets. I know you've talked a little bit about the drivers for that growth acceleration. I'm curious to hear if there is one driver that you would call out that would be the main one that you expect will drive acceleration of growth to the [ 7% to 9% ] target that you've set? And then last question on your midterm guide for the margin. So obviously, you've already reached the top end of that guide. Do you still see more opportunities to continue increasing the EBITDA margin?

Sure. Thanks very much, Laura. In terms of network connectivity, to your point, we called out that one-timer of SEK 60 million. There's nothing else that we would call out around network connectivity. We'll continue to manage that business as we have been, which is to manage it for cash ultimately. And so that's been a pretty stable business for us. In terms of the midterm targets, to your point, we called out four growth drivers, and that was around enterprise growth, self-serve, conversational messaging and e-mail and then finally, partnerships and ecosystems. If I were to pick one, I mean, all four are important, but if I were to pick one, it would be around partnerships and ecosystems. We see enterprises starting to purchase more and more through partnership and also the AI ecosystem very specifically requires a tremendous amount of integration to be built in the broader ecosystem. So I think that particular area of focus around partnerships and ecosystems is the one that we absolutely need to nail.

And then finally, in terms of the midterm guidance or targets, I should say, with regards to our adjusted EBITDA, for everybody's purposes, we have targeted 12% to 14%. And to your point, we're at the top end of that range. We're going to stick with that -- those targets at this moment in time. We are always looking for opportunities to create efficiencies within the business. You should expect to see us do that as a normal course of business practice. But we also need to ensure that we're investing in growth. And so we're going to retain that financial target at this time.

Next one, we have Thomas Nilsson from Nordea.

With your current modest leverage, how should investors think about the balance between share buybacks, M&A opportunities and debt reduction over, say, the next 12 to 24 months?

Yes. I think we have a clear capital allocation strategy. And currently, we think it's in the shareholders' interest to continue the buybacks, and that's why the Board has recommended shareholders to vote for this cancellation of shares and hence, that provides more flexibility to commence the buybacks. So -- and if the share would rerate significantly, it could be that M&A becomes more attractive, and then we switch gear basically to M&A. The Board will, at every point in time, assess what's the best capital allocation. When it comes to leverage, I mean, we have a leverage target, which is that we should be below 2.5x. We could, for periods go over 2.5x, but 2.5x is the target.

And now we have Fredrik Lithell from Handelsbanken.

I just had sort of a housekeeping. The fixed price contracts that you ended and that you have described and talked about since last summer, are there any other of those new types of contracts that you sort of cancel or discontinue? Or is it the same that we talked about as you talked about in the fall? So that's pretty much the first question. Could you -- Laurinda, could you talk a little bit more about America and what drives the growth for you because it's quite healthy right now, and it also looks quite broad-based when you look at the type of clients you're signing up. Are there you that are more active in new sales? Or is it the market that is turning more sort of growth oriented or so could you talk about that?

Sure. Yes, absolutely. Fredrik, why don't you take the first one, Jonas, and I'll jump back on the two.

Yes. So when it comes to the fixed price contracts, these are the same contracts that we talked about earlier. And many of these contracts have a 3-year duration, so it takes some time to phase out.

Fredrik, I appreciate the question on the Americas. It's a combination of a number of things. This was the largest region that had probably the most complexity in it when I look at Sinch, meaning that all of the acquisitions that we had done historically, they all had meaningful presence in the Americas. So when we attempted to transform this part of the business, we had a lot of consolidation coming from a lot of different entities bringing these sales teams together.

So the way that I think about it is the North Star was defined for the go-to-market channels, which meant that we had a full Sinch portfolio across all of the different channels of communication, and we wanted our sales teams to be able to offer that full portfolio to their customers ultimately. That took some time, of course. It requires training and enablement. It requires changes of incentive plans, which also take time for salespeople to absorb and understand how to operate within their incentive structures. It requires tooling and visibility into their customers. And so a lot of the work has been done in the background to make sure that the sales teams have that enablement, that visibility and also are focused in on the highest growth opportunities.

So a big part of what took place during the -- really the last 18 months or so in the Americas was a big effort around segmentation, making sure that we had the right capabilities and the right talent focused in on the highest potential customers. And that translates differently by segment. So it's a number of things. Certainly, the market is strong. We see that with some of our competition. And had you given me this market 2 years ago or 3 years ago, I don't think Sinch Americas would have been in a position to capitalize on it, but we are now.

Do you feel also the same sort of the response from large enterprises that they recognize you in a different way today after all your internal efforts to sort of also have a better window to the clients?

Yes. I think the large enterprises were frustrated by us in prior periods because we did not face them in a unified way. That's not the case now. There's a very specific account relationship and account-based marketing, quite frankly, that we face off to these customers. And so -- and the conversations are also elevated within the enterprise. So you're no longer just speaking with engineers or marketeers, you're speaking at a higher level within those organizations to be able to discuss and negotiate larger commercial opportunities.

Next one, we have Victor Cheng from Bank of America.

Maybe just two from my end. Going back to the point about buybacks and M&As and the balance of it. Have you seen maybe some of the targets that you're tracking valuation coming down? Is it an opportunistic moment to maybe look at more acquisitions or maybe on the private side, that hasn't really reflected some of the derating that we saw on the public side? And then secondly, just on the whole kind of AI-driven conversational messaging narrative, can you help me understand maybe overall what levers they are to monetize AI? Have we thought about like maybe different pricing model, outcome-based pricing or whatnot?

Jonas, do you want to take the first one, please?

Yes. So to your first question, what we're looking at and how those valuations are changing. I can't really or don't really want to comment that. But obviously, valuations in general are being challenged by the market. And if opportunities arise, we will act on that. And so far, we found it to be more attractive to do share buybacks.

And on the second one with regards to AI and more broadly conversational messaging. When we think about the role that Sinch is playing within the AI ecosystem, it is to enable or execute the communication layer. And as more and more agents are tasked with workflows and certain business outcomes, they will decide ultimately who they choose to send communications through. What we're doing now is trying to natively integrate with these AI platforms and these AI native companies to ensure that Sinch is the obvious choice for those agents. In terms of pricing models themselves, I don't think that we've figured out a new interesting way to do it just yet.

I mean, obviously, each commercial agreement and relationship does tend to have nuances to it, so they could differ. But I do think that there is an opportunity to layer intelligence and orchestration into this model in a way that hasn't existed before. So those are areas that we have a right to win in and that we will continue to explore in order to further monetize this opportunity.

Next one, we have Deepshikha Agarwal from Goldman Sachs.

I just had like a little bit of a housekeeping sort of a question. The first one was basically like up until the third quarter, it was indicated that there will be sort of a reversal of the revenue impact that was there in network connectivity in Americas that would impact in the fourth quarter. But again, we have sort of a COGS reversal as well, which is sort of like netted off. So just wanted to understand like this dynamic and how to think about it going forward.

And the second one -- and then again, also on the top line, it's basically like understanding the bridge between the current like 3% organic growth fourth quarter in terms of -- and how -- like how should we think about it in FY '26 in terms of the growth trajectory for the gross profit? And the third one is basically like there was a tax provision of like about SEK 700 million, which was recorded in 2024, which was supposed to be paid out over the course of the next 2, 3 years. Just wanted to understand like what exactly will that be? And how will the dynamic look from a cash out standpoint on that?

Sure. Do you want to take the tax provision piece, Jonas, and then I'll come back with one and two.

So on the tax provision, so this -- our best estimate now is there will be about SEK 200 million cash out for the tax provision during this year and the remainder in the future. But I would like to emphasize this is a preliminary estimate.

Okay. And then just to -- just to clarify, there was no payout this year would be the way to think about it?

There's been a minor payout so far, but it's very limited.

With regards to network connectivity going forward, I mean, we -- the reason why network connectivity has performed as well as it has is we took very specific actions around it. But remember, what we've always said about network connectivity is it's a fairly flat business in the market. And we would continue to manage that business for cash ultimately. But the actions that we took over the course of the last year and will continue to try to affect the actual results of network connectivity is two things. One was negotiating the pricing side or the cost side, I should say, with our suppliers and then also re-rating some of the pricing that we had with regards to our customers. So I think you should continue to think about network connectivity in the same way. In other words, relatively flat growth, and we will manage it for cash.

In terms of the organic growth at the GP level, it was 3%, to your point, in fourth quarter. We said last year that the first half of the year would equal the second half. It did exactly that, and we averaged out at 4% for the full year. What we've said today is that we expect the same trends in the first half of this year, meaning that we see the tailwinds and the momentum that we're seeing in the Americas as well as in the API business to continue, but we also expect those tailwinds that we called out around the fixed price contracts winding down and the pressure in India and Australia to continue also in the first half. So you can do your calculations to come up with what that means ultimately.

Next one, we have Bharath Nagaraj from Cantor.

Just a couple from me, please.

How are you preparing in terms of what could be the potential impact when there is more rollout of passkeys instead of onetime passwords? I've heard recently somewhere in the news that some countries are proposing this, and there could be -- this could happen in other regions as well. I do know that Sinch has like all sorts of security approval processes, but just wanted to see if there's any impact and if there's anything else you need to do to prepare for that?

And secondly, if I may, what else do you need to do in 2026 and 2027 to unlock, let's say, further growth within the main lever that you suggested that the partner ecosystem. Is there any investments you need to make, development, et cetera, as well? Or is it already all done and you think that you're in a good place to deliver on the targets of 7% to 9% growth?

Thanks, Bharath. In terms of the -- basically the security side of things and verification, the business that we currently have today with regards to onetime passcodes is relatively small in the overall messaging business that we have. That being said, we do have several different verification and security type of products to be able to offer out into the market. But we also, like many others out there, looking at the selling verification and basically Verification 2.0 so that we can enable or leverage network APIs around verification. So I'm not sure if that's answering your question explicitly, but that's how I think about it.

In terms of the second piece and what needs to unlock further growth, we're on a trajectory to that midrange growth target. I don't think that there's anything new in terms of investments that we need to make in order to meet that 7% to 9% target that we've put out for ourselves by the end of 2027. Like I said, we've grown 4% in 2025. The target is 7% to 9% by the end of 2027, and we've got 1.5 years in between. And we always said that it would be a steady march towards ultimately that growth. Are there opportunities to invest? Yes. And we will continue to evaluate those and make sure that we get the appropriate returns within the business and for our shareholders.

Next one, we have Erik Lindholm-Rojestal from SEB.

No, maybe that was one -- thank you. So thank you, everyone, for listening to us today. We will be back for the Q1 presentation on 7th of May. If you have any questions, feel free to reach out to the IR department. And once again, thank you very much, and goodbye.

Very welcome to Sinch Q3 2025 Report Presentation. My name is Mia Nordlander, and I'm Head of Investor Relations & Sustainability. With me here today, I have our CEO, Laurinda Pang; and our CFO, Johnas Dahlberg. We will hear them presenting the quarter and thereafter, there will be time for questions. [Operator Instructions] So once again, very welcome to this presentation. I hand over to you, Laurinda.

Thank you, Mia, and thanks, everyone, for joining us today. One year ago, at our first CMD, we shared a strategy for value creation and today marks a clear milestone of our disciplined execution and value delivery on that strategy.

Let's turn to Slide 2 to look at the highlights from the quarter. As we begin, I will remind you of the continued large FX headwinds in the quarter, mainly due to a weak U.S. dollar. As we always do, we will point you to organic changes, which normalize these swings and are a consistent representation of the underlying business. I am pleased to report a quarter of continued organic gross profit growth, improved profitability and the initiation of our share buyback program.

We delivered solid performance that demonstrates focused execution against our strategic priorities, even though currency effects obscure some of the underlying momentum. Gross profit of SEK 2.3 billion grew 5% organically year-over-year and roughly in line with last quarter. We expanded gross margin to 35%. Both the gross profit and gross margin development are a testament to the strength of our offerings and our focus on higher-value interactions and more profitable product lines. Our ability to expand profitability in a dynamic market highlights the resilience and efficiency of our business model.

However, turning to the top line. Net sales were flat year-over-year at SEK 6.7 billion, and I want to be direct about this. While our profitable growth is very positive, this level of revenue is not what I expect nor is it the shape of the growth we are aiming over the long term. I'll address this further on the next slide when we break out the regional segments.

Adjusted EBITDA of SEK 915 million increased organically by a strong 8%. This was an adjusted EBITDA margin of 14%, which was the highest on record since 2019 and was driven by gross profit growth and operational efficiency. As a reflection of our confidence in our strategy and financial strength, Sinch initiated its first ever share buyback program during the quarter with 1.8% of shares now held in treasury.

Beyond the financials, we are proud that Sinch was named a leader in Gartner's Magic Quadrant for CPaaS for the third consecutive year, a powerful validation of our market position and strategy. We also ranked #1 in their critical capabilities for CPaaS report for multinational organizational use cases. This highlights the strength of our platform's ability to meet the complex needs of global enterprises.

We also strengthened our position in AI during the quarter with leading innovators across all regions adopting our API products to power customer engagement, underscoring the scale and robustness of our platforms. And in an important milestone of conversational messaging, we launched RCS for business with all 3 major mobile operators in the U.S., cementing our leadership in this transformative channel.

Let's look at Slide 3 next, please. To begin, let me provide some color on the flatness in net sales. This primarily reflects 2 factors: First, we've encountered competitive pressure in the traditional messaging space concentrated within a few large accounts in the Americas customer base and in the India market more broadly. Second, we have continued to steer away from fixed price contracts that have negatively impacted EMEA and, to a lesser extent, Asia Pac as these opportunities do not fit an acceptable risk profile.

However, we're not standing still. We are proactively reshaping our revenue profile for more sustainable long-term success. This strategy is twofold: first, diversifying our customer base; and second, accelerating our leadership in conversational messaging. We are making excellent progress on customer diversification, having recently secured several notable new enterprise clients who are in the early stages of ramping up their volumes. While their full contribution is not yet reflected in our top line, they represent a significant driver of future growth.

And the key reason we are winning in our leadership is our leadership in conversational messaging. We grow here by winning new customers directly on to modern channels like RCS and WhatsApp and migrating our existing base to these higher-value interactions. In India, for example, this combined success in over-the-top channels and strong growth in e-mail has neutralized the pressure on traditional messaging.

In the Americas, while net sales were flat, the region delivered strong organic gross profit growth of 8%, with margins expanding by 2 percentage points. This was driven by a strong turnaround in our U.S. network voice business and solid performance in other product categories. In EMEA, organic net sales and gross profit declined by 2% and 3%, respectively. This was primarily due to the strategic decision I just mentioned regarding steering away from fixed-price contracts. Notwithstanding this, the underlying API business remains healthy and is growing.

And in Asia Pac, organic net sales grew by -- I'm sorry, 7%. Organic gross profit increased by 1%. The strong net sales performance was driven by new large messaging wins, but was offset by competitive pressure in applications in Australia and the India SMS pressure I mentioned earlier. We've been experiencing this downward pressure for some time, but Sinch India has now stabilized sequentially. Before we leave this slide, let me reiterate the actions I mentioned diversifying our base, leading in next-gen messaging and e-mail and improving our commercial terms. These are fundamental to building a more resilient and sustainable business. They strengthen our foundation and position us to capture higher quality growth going forward.

Next slide, please. Our strategy for value creation is very clear. We are executing with discipline. It is built on 3 core pillars: reaccelerating growth, expanding our EBITDA margins and disciplined capital allocation, all fueled by continued cross strong cash generation. The third quarter marks another period of significant progress across each of these pillars and is another firm step on our path to delivering our midterm financial targets of 7% to 9% organic growth and 12% to 14% adjusted EBITDA margin by the end of 2027.

Next, on Slide 5, let's look at the progress for growth reacceleration. The 4 growth drivers we outlined are deeply interconnected. In enterprise expansion, we are winning with the world's most demanding businesses. Our large enterprise customer base has increased by 5% year-to-date, including the addition of companies like Nespresso, Visa, Dollar Shave Club and Nordstrom.

Our self-serve products continue to be a powerful growth engine, delivering high-margin, double-digit growth year-to-date. As another proof point, our self-serve capabilities are resonating in the market. We have increased our customer count to more than 190,000. As it relates to RCS, our traffic has tripled year-to-date. And as mentioned in the third quarter highlights, we have now fully achieved coverage with all U.S. Tier 1 operators.

Touching quickly on our continued strength in e-mail, volumes have increased nearly 40% since last year. And finally, partners and ecosystems, which is all about scale. We embed Sinch directly into the workflows of the world's leading enterprise software companies. The partner-enabled business has grown gross profit by 5% on a year-to-date basis. These growth drivers are powered by 2 major opportunities. The growth in conversational messaging and the rise of generative AI.

Let's move to Slide 6 to take a look at our progress in conversational. We are a leader in this transformation and the momentum in conversational messaging is a clear testament to the market's demand for richer engagement to enhance the customer experience. Our RCS message volume growth is being led by India, LatAm and early adopter markets in EMEA, like France. And in the U.S., we have some great early use cases with brands like Enfamil and Omaha Steaks. We have launched WhatsApp upscale as a complement to RCS upscale. This is more than just switching channels. It's about delivering real business impact through better security and higher trust, improved conversion rates and more innovative customer communications.

To illustrate the last point, our customers, Picard, Courir and Clarins were nominated for innovation awards for their high-impact RCS campaigns. Clarins took home the win. By transforming customer communications with rich interactive messaging, their campaigns deliver much higher engagement and stronger business outcomes.

Next page. Generative AI is set to dramatically amplify the effectiveness of conversational messaging. While these 2 phenomena evolved independently, they are now creating a powerful synergy, where each makes the other more valuable. Put simply, consumers now expect conversations that are intelligent and context aware. AI provides the intelligence to meet this demand, while rich channels like RCS and WhatsApp provide the perfect vehicle to deliver those enhanced experiences. This powerful combination is creating an exciting new era for digital customer communications. In this era, machines themselves are becoming new buyers of communications. As autonomous AI agents begin to orchestrate interactions, they will drive a significant increase in overall communication volumes.

On the next slide, I'll talk about what this inflection point means to Sinch. First, we see strong market validation that we are a platform of choice. The world's leading AI innovators are building their future on our infrastructure, choosing Sinch's APIs to power their communication needs across all regions. This reinforces our unique position as the trusted execution engine. These companies need to know that when AI triggers a message to be sent, it gets delivered securely and reliably every single time. That is our core strength. Our leadership in this new AI era is built on a foundation we have been laying for years. We have strategically embedded AI across our product suite to make our solutions smarter, more intuitive and more valuable.

Let me give you a few tangible examples of how we are delivering value to customers today. In e-mail, Mailgun Inspect uses AI for quality assurance and our open source MCP server allows developers to query at e-mail analytics using natural language. In multichannel campaigns, our Sinch Engage platform uses AI to orchestrate campaigns, personalize experience and create content. In voice, our programmable voice API allows businesses to automatically capture and transcribe conversations for compliance analytics and deeper customer insights. And in our core messaging offering, AI is deeply embedded to enable our customers to recognize intent, perform sentiment analysis and protect their users from detecting -- by detecting profanity and spam.

We are continuing to enhance our platform's capabilities and enabling campaigns and conversation orchestration. We have already seen a 41% year-to-date volume increase in conversations facilitated through our chat layer platform and are now developing AI agents directly within our Sinch Engage platform. We expect to launch a closed beta with our first customers before the end of the year.

In summary, this trend directly fuels our platform's capabilities and growth. More AI adoption means more traffic generating more revenue in our existing core business. We are the essential communications layer for the AI economy, and we are well positioned to grow as it does.

With that, I'll hand the word over to Johnas to take you through the financials in more detail.

Thank you, Laurinda. So let's get into the financials and we start at the top of the [indiscernible] with net sales. So first, a couple of words on our financials. When looking at Sinch's financials, it's important to understand a couple of things. The first thing is that we have a strong seasonal pattern, where there's typically the year-end, that's the strongest driven by the retail season.

Secondly, we have significant FX effects. And our reporting currency is Swedish krona, but it's a very limited share of our business. In fact, the U.S. dollar is the dominant currency of trade with about 60% of the business. So there's a lot of FX effect, and that's why we always communicate organic numbers for comparability and communicated year-on-year.

So in the quarter, net sales came in at SEK 6.7 billion, and that's down 7% due to currency translation effects. However, when adjusting for this effect, we have a marginal positive organic growth. Now under the surface, there's actually more excitement as we exhibit continued solid net sales growth in our high-margin products such as our e-mail product and several of our applications.

Moreover, we continue to diversify our customer base and reduce customer concentration in all this provides a positive mix effect and stronger financial profile, both here and now and for the future.

Next chart, moving on to gross profit. Looking at organic numbers, we continued with a stable 5% growth in the quarter with the strongest growth coming from our most important market, which is the Americas. The improvement in Americas is driven by all product categories, including our API and application business, but with a particularly strong quarter for our network business, which is now really back after the turnaround.

What's positive in the quarter across the company is that all product categories contributed to organic GP growth as well as 2 out of our 3 regions. However, on a reported basis, we have this currency translation effects and the impact is 8 percentage points as a currency translation headwind.

Moving to our margins. Combined, we have a very positive development of our margins with a strong 34.8% gross margin in the quarter, and this is an increase of 1.2 percentage points year-on-year. And this improvement is driven by a combination of both increased profitability at product level as well as a positive product mix shift.

As I mentioned earlier, our most profitable products continues to grow faster than the average mix and this is mainly our e-mail products and application hence, contributes positively to the higher margin through a positive product mix shift. Disaggregating these 2 effects, about half of the margin increase comes from a positive development of product margins, while the other half comes from a positive product mix shift.

Moving over to EBITDA margins. We delivered close to a record high 14% adjusted EBITDA margin. In fact, in modern Sinch time, I would say, it's highest post-2019 and acquisitions we did in '21, which truly transformed the company. And we also see a very strong margin on non-adjusted EBITDA and we're already now at the upper range of our 12% to 14% EBITDA margin target for the end of 2027 that we established 1 year ago at our Capital Markets Day.

So in terms of the targets that we set out 1 year back, one is down and that's the EBITDA margin target and now it's one to go, which is really to get the gross profit growth also going.

Moving to the next page to take a closer look at cost and EBITDA. Starting with operating expenses. We continue on our path of cost discipline and continued synergy extraction in the combined Sinch. So OpEx is down 5% compared to the same quarter last year, which represents a marginal 3% organic OpEx increase.

Measures we're taking on the cost side are about leveraging truly the combined strength of Sinch, consolidating platforms and products, consolidating support functions to lower cost locations and recently leveraging AI to gain efficiency throughout our operations. I want to stress that this is not a one-off effort, but rather an ongoing effort over several years to increase our cost efficiency, and this effort will continue and there is more potential.

It will both support the potential of increased profitability in line with our target as well as allowing for investments in future growth, predominantly through investments in sales, marketing and product development. So with an organic 5% GP growth with only 3% OpEx growth, we get a favorable drop down to adjusted EBITDA with an 8% organic improvement in the quarter. And since we have lower adjustment items, primarily through SEK 41 million lower restructuring and integration charges, we achieved 16% organic EBITDA improvement compared to the same quarter last year.

Moving over to cash conversion and cash flow. Operating cash flow amounted to SEK 1.4 billion over the last 12 months, which corresponds to a 30% cash conversion rate and this is very close to our guidance of 40% to 50% cash conversion over a 12-month period. It's important to emphasize that we have some working capital swings between quarters, but this is quite normal for us.

So I would like to say that the cash conversion rate going forward and what we report now is very much in line with what you can expect. So just to prove this point, I would like to move over to net working capital. Sequentially, we're essentially at the same level of receivables as the last quarter and the negative impact on working capital mainly comes from lower payables in the quarter. And in fact, it's the lowest level of payables in several years.

But in all, we continue to operate the business with a negative working capital, although a slight increase from the previous quarter. So while we have and will likely to have variations in cash flow impacting quarterly, sorry, in net working capital influencing quarterly cash flows, we don't see any structural changes impacting our working capital and stay confident with our cash conversion guidance.

Lastly, before handing back to Laurinda, looking at the balance sheet. We continue to have a strong balance sheet with net debt to adjusted EBITDA, slightly increasing to 1.4x. And as you know, in the last quarter, the BOD result activates the repurchase program mandated by the AGM, allowing for a repurchase of up to 10% of outstanding shares.

And during the quarter, we repurchased 1.8% of outstanding shares for some SEK 519 million. And in addition, we spent SEK 241 million for an equity swap arrangement to hedge Sinch long-term incentive program. And in this program, a partner bank acquired further Sinch's stock for SEK 241 million. So in total, this corresponds to 2.7% of outstanding shares.

And in combination, these are the drivers for a slightly increased leverage ratio in the quarter. What's worthwhile to mention also is that during the quarter, we also refinanced existing bank facilities at largely unchanged and very favorable terms, which means that currently have an additional SEK 4.2 billion in unused credit facilities. And with that, I'm handing back to Laurinda.

Thanks very much, Johnas. Okay. So before we go to questions, I just wanted to reiterate our value creation agenda here. It's around 3 pillars: reaccelerating growth, expanding EBITDA margins and a disciplined capital allocation strategy. We've in the third quarter, delivered on all 3 of those, an important step towards our midterm guidance, which we also reaffirm here today.

So with that, I'll open it up for questions.

[Operator Instructions]. First, online we have Erik Lindholm-Rojestal.

Yes. So 2 questions. please, if I may. I'll start with one and then come back with the second one, perhaps. So just on API platform. You had quite solid development in this area in Q2 that seemed to slow quite clearly in Q3. I'm just wondering sort of what gives you confidence that you can reaccelerate in this area? And is it mainly sort of driven by these new enterprise wins and the conversational piece that you mentioned?

Or -- and is it fair to say that the growth here maybe will be a bit lower during the period of shutting out these fixed price contracts in EMEA?

Yes. Thanks, Erik, for the question. To your point, the 2 pieces or the 2 headwinds that I called out do both affect the API platform. And to your point, the fixed price contracts will -- they will cycle out over the next several quarters. So that will continue to put pressure from a year-over-year standpoint.

However, the increases in the new customer wins, those are within the API platform. And as those volumes come online, we've seen some of them, but they're not at full levels. But as those volumes come online, they will have a positive impact as well conversational messaging. It will show up in the API platform as well. So we've called out the headwinds, but we also have a good line on what the incremental growth will look like.

And I'm sorry, one last point I would make is the AI contracts that I talked about that we have come to agreement within the third quarter. Those will also positively impact API over the long term.

Great. And just as a follow-up to that, perhaps, I mean how meaningful are those AI contracts today? And when do you think we will start sort of moving the needle meaningfully on the group level?

Yes, they're not meaningful today because they just got -- the agreement just came to term. So they've yet to ramp. The way that I see this -- this new way of doing business in this new AI world with these innovators is they're going to come to us with regards to specific use cases, and they will grow from there.

So I do think that, as I mentioned in my prepared remarks, this combination between AI and conversational messaging will absolutely generate larger volumes for communications, ultimately, and again, these newer contracts are the first step to being able to capture those volumes.

All right. Perfect. And then just a question on customer connectivity. It's really a stellar quarter and it looks like more than 20% organic GP growth in Americas in this segment. I mean how sustainable do you think this gross profit level is?

And yes, what are your sort of more long-term hopes for this business?

Sure. On the network connectivity side, if you remember a bit over a year ago, this part of the business was on a fairly rapid decline, and that resulted from some significant price increases from carriers in the U.S. And we have completely reversed that. So the performance in network connectivity today is as a result of turning around that business that comes after really 3 aspects. The first was price negotiations. The second was price increases to customers that leverage these services. But then the third was also the transition from the legacy network infrastructure into a go-forward infrastructure.

And I think we've spoken about that quite a bit in the past. So the price increases to customers you can only go so far. I would say that we're getting closer to the end of that. The cost savings from price negotiations are fairly flat, I would say. But the larger opportunity for us is to get completely off of this legacy infrastructure that will have a very meaningful impact to us on the cost side.

The other thing I would call out in Q3, and I apologize, is there was an actual release -- an accrual release that positively impacted us in Q3. So you should not look at Q3 performance for network connectivity and think of it as the new baseline. It's unusually high.

All right. Great. Are you able to quantify that one, the accrual?

I think what you should look at is more the sequential development and then from previous quarters, which is a step-up from previous performance. And then it's difficult to say with precision, of course, and we don't give exact guidance, but it gives you a hint.

Next online, we have Ramil Koria from Danske Bank.

Just trying to parse out sort of the moving parts here. Trying to sort of understand what's new here in Q3, which you didn't know going into the quarter, so to say. So the pressure in Australia, competitive pressures on large U.S. customers, fixed price contracts in EMEA being phased out. Like what's new of this? And why did you decide to take the actions you took now in Q3?

Ramil, excuse me, it wasn't my voice. So if you remember, in Q2, what we said from a GP perspective was that you should expect the average of the first half of the year to look quite similar in the second half of the year. So I think we started in Q1 with 2% gross profit growth, and we went to 6%. Now we're roughly at 5%.

So we actually did call for a fairly, call it, quarter-over-quarter stable quarter. And so the fixed price contracts is a continuation. I raised that in the first quarter. I wanted to remind everybody of that because it did dramatically affect the EMEA business this quarter.

And then as far as the price compression or the price competitiveness, that's been going on, I would say, for roughly the last call it 6 months or so. And so we've had to make a few concessions there. But conversely, we've had some good wins. So these are pieces that we've known. And we're just telling you what the headwinds are that affected us this quarter.

That's very clear, Laurinda. And then, I mean, I'm clear, clearly, there is some mix shift happening in the business as well. Year-to-date, the gross margin is up more than 80 basis points year-over-year. How dependent are you on volume growth into 2026 to deliver on the notion of Sinch being a growth company?

So first of all, the most important metric for us is GP growth. Having that said, over time, we obviously need net sales growth as well. I think it's -- the audience has to define what's a growth company. But we are progressing towards our target of 7% to 9% gross profit growth at the end of 2027. You remember that we set out 2 targets 1 year back. One was on profitability. We said we would deliver 12% to 14% EBITDA margin on an adjusted basis, we're now actually at 14% and nonadjusted 13%, so we're already at the upper range.

So one down, one to go. But we also said it won't be a straight linear extrapolation when it comes to growth. So we are confident that we're on the right track towards our targets and we're progressing basically.

Okay. And then a question I've asked before, perhaps I'm sounding like a broken record here, but trying to understand like where the competitive pressures are coming from because all your listed competitors operating in the U.S. have higher gross margins and they seem quite reluctant to dilute the gross margins?

And you guys coming from sort of a lower base, so to say, in having the scale benefits, when you bargain with carriers. Could you shed some light on -- are these U.S., European or Rest of World players competing for these volumes? And where are the volumes originated that you're giving concessions on right now.

So first of all, the absolute level or the gross margin level with competitors depends on the mix. That doesn't mean that they have parts of the business where they can compete with us and be quite aggressive. And where we see competition is -- competitive pressures is mainly on a very limited number of very significant accounts, who basically set up multi-vendor relationships and there, it's highly competitive.

Now this is a continuous competition. And we -- sounds like we're losing any customers. We may have lost a bit of volume, but we can fight back also.

And Ramil, the competitive pressure we're talking about is predominantly on the messaging side, the traditional messaging side, right? So yes, we've had a disciplined approach, but we also have the ability to change the product mix and deliver on higher-valued products, which do bring higher gross margin.

So when you look at the overall mix of the business, to your point in shifting and it is maintaining our gross margin level. And so I would just make sure that that's not lost on the audience here.

Okay. And then just geographically speaking, where are you seeing the competitive pressures in terms of termination of the volumes?

So it's -- as I mentioned, a few accounts in the Americas, we're seeing large pressure in the India market very specifically, but that is intra India. It is based off of the telcos getting into the SMS business for large local companies. Those are the 2 callouts that we would make.

Next one is Predrag Savinovic from DNB Carnegie.

The first one, based on what you said, our network connectivity and on accruals, so if we think then of organic GP growth for Q4 and sort of start of 2026, will these growth rates be declining from the level we see now in the third quarter?

Sorry, I didn't exactly get your question here please. The accruals?

And based on what you said in terms of network connectivity that the growth rate there could be on an alleviated level right now in the third quarter. So if we look down to Q4 into 2026, the start of '26, could we see that the growth rates will be declining from the levels we see now in the third quarter?

I think as Laurinda said, you can't use the third quarter as our new baseline for the sequential development of network voice. But -- so look more at the sequential numbers you've had earlier in the year, and then we continue to improve the business. But again, we can't give any precise guidance. What we can say is this business is turnaround, and we continue to work on the cost side. Shifting out legacy TDM technology with much more cost-efficient IP technology, and that will continue to drive margins, but that will mainly come in the next year.

Sure. And I was unclear. I was thinking more of based on the potential extra tailwind in that segment and then refer more to the organic growth rates on group level, if 5% makes sense or 4% makes sense, average of Q1 to Q3 makes sense towards the next coming 1, 2, 3 quarters?

Yes. So what we've said and what we continue to say is the same thing that the second half of the year on average will be in line with the first year -- first half of the year.

Okay. Super. Then in terms of the customer account growth of 5% that you call out in Q3, if you can relate this to the first and the second quarters, please?

We've been on this study -- this is 5% on a year-to-date basis per drag and so this has been steady since Q1. I think we actually called it out in Q1 as well at 5% and what -- the definition of enterprise customers is customers who are spending north of USD 150,000 per year with us.

U.S.

U.S. dollars, sorry yes, U.S. dollars.

Yes. Super. So basically, you're continuing on a healthy net adds trend on the customer side is the message here.

Yes, absolutely.

And then on a follow-up question on what you've discussed on AI so far and the benefit you see and what drives this. So I think from the outside, it looks to me that Sinch is mostly beneficiary from playing on the infrastructure level rather than the application level compared to, for example, Twilio based on the examples you gave, but I may be wrong here, I would love to hear it takes here and more on what Sinch could be powering on an application level as well if that would be the case.

Yes. So we actually do both. We have, on the application side, I actually called out a couple of examples of what we're doing there relative to our e-mail product as well as our Sinch Engage platform. So we are embedding AI capabilities into both of those platforms to enable customers to be able to develop their own campaigns, to personalize content, to create content, et cetera.

And that -- the application side of the house is the side of the house, it's the highest margin and our self-serve business is growing at a healthy double-digit rate. So that's positive. The other piece to your point is the infrastructure side. Our infrastructure -- the fabric of the network and the capabilities that we have is the perfect vehicle for AI-powered communications.

And so that, I think, comes through a couple of different ways. One is through the large innovators themselves and their needs to power their customers and then also with agents more directly. And those can come from the large innovators as well as enterprises as they become more -- they lean more and more into Agentic AI.

And next online, we have Laura Metayer from Morgan Stanley.

3 questions, please. The first one is on the -- on your midterm growth targets. What do you need to do to bridge your gross profit growth to your midterm targets? And what are the key priorities? Second one is, you talked about early success in terms of benefiting from increased communications from autonomous AI agents. Can you give us a sense of the kind of contract terms that you have on those first contracts that you've been signing? Are they aligned with your usual types of contracts?

And then lastly, so AI is expected to reduce the cost of coding and software development, could you please get your view on whether you think Sinch is insulated from the risk of AI disruption in the form of in-housing? And if so, why do you think that's the case?

Okay. Laura, so midterm growth. To your point, we have organic growth of 7% to 9% that we've called out and what we need to do in order to bridge that is deliver on the growth drivers that we've called out. So that's expanding enterprise that's to continue this double-digit rate in self-serve -- it's to win in the conversational in the e-mail space.

And then it's also the need to win in the partners and ecosystem space. So those are the 4 key growth drivers that we've called out. When we did call those out, we didn't have AI in the mix. And so I would say that AI will be in addition to that. In terms of the contracts with these AI innovators themselves, we're not going to talk about terms per se, but I wouldn't say that they're unusual at this point. I think that right now or I know right now, these sorts of contracts are coming in at a use case level.

So they're pretty limited in terms of volumes. But I would imagine as we grow with them, that there'll be terms that will become a bit more aggressive or competitive. And then finally, the in-housing or the cost of coding. Did you -- was your question, do you think we're immune from that or?

Correct. Yes.

If there is a risk that we will be disrupted. So if I start, really, the core of our business is a communications -- infrastructure that powers communications and that will not be disrupted. If anything, it will be enabled by AI, making the communication easier and also drive more communication. So the answer is no.

One follow-up, please, when you talked about the growth drivers for your midterm targets, you said that you can have AI in the mix when you call those out initially. Does that mean that with AI now representing an opportunity for you, you think you could potentially grow faster than what you said are your midterm targets?

Yes. We haven't changed our midterm targets yet, but I'm being, again, full disclosure. We had those core drivers outlined 1 year ago, and AI was not a part of it.

The thing I'd like to add on the midterm growth is you're asking what do we need to achieve to get there? I'd like to remind you that there is a bit of drag currently from the fixed price contracts in India that influence how we deliver on, I guess, comparable numbers. So once we're out of that drag and obviously, assuming there is no new drag coming into the business, that's also positive.

Next one is Daniel Thorsson from ABG.

Yes. 2 questions. The first one on the phasing of the fixed price contracts in EMEA and also related to your reasoning on the financial targets being in the upper end of the margin already and now looking to reinvest into growth. Does that mean that those fixed price contracts are actually loss-making because otherwise, they would likely help you to reach a higher GP growth as you are already within the margin range. So just to understand why you do this and also if you have more to come ahead as well?

Yes. Thank you, Daniel. Excellent question. So the problem with the fixed-price contracts are not really the margins per se. It's more the cash flow profile and the risk profile and if you go back a couple of years, you will actually see the discussion around this contract. So it's part of more risk management and also the sustainability of those contracts is more a transaction over a limited period of time, and it becomes pretty volatile.

So -- this is more the logic why we're not super excited about those contracts. We haven't taken a decision to completely exit, but it's more taking a more cautious stance. To provide some numbers here at the peak, this represented maybe 3% of GP and now 2/3 of that is gone and that has happened over a 12- to 18-month period.

And now what we need is another 12 months to get it out of the comps. So that gives you a little bit of guidance of that impact. And it's predominantly consolidated in the EMEAs. That's why you see the drag on EMEA.

Okay. Excellent. That's very clear. And then the second one on the increased competition in certain markets you mentioned here. Does that increase your appetite for a return to M&A by consolidating some markets and become a larger player? Or do you view your options differently here?

Well, first, I would say that M&A continues to be a part of our strategy, although we've been quiet for the past couple of years as we've been integrating these companies. So very much, we have an appetite for that. Certainly, we've been spending the last 2 years cleaning up inside of Sinch and while we're not complete, we've certainly made progress.

So -- we certainly are in a position at this point in time. The balance sheet is strong. So again, we are in a good position. Consolidation needs to happen. We're believers in it. This continues to be a fairly disjointed or disaggregated industry. So there are plenty of opportunities there to potentially consider.

Okay. So can I just end with the final short one here. Is the emergence of RCS and WhatsApp volumes here growing 3x year-over-year? Is that hampering net sales growth, but enhancing gross profit growth due to potentially lower prices but higher profitability for you?

No.

Next one is Fredrik Lithell from Handelsbanken.

I thought, Laurinda, maybe if we saw Twilio report a bit earlier here last week or something like that. And they had an organic growth of north of 10% and you're about flattish. I know -- I mean, your peers, but you're not apples to apples. So if you would pick some of your pieces apart and compare, where do you see you spend in comparison to Twilio's similar units would be interesting to hear your elaboration on it without sort of picking on Twilio necessarily?

Thanks, Fredrik. Yes, it's -- to your point, it's hard to do a direct comparison because certainly, I think the normalization of the business, I know how we do it, I don't know how they do it. So that's hard. The other piece is just the business mix is different, even though we sell similar products, just the segments as well as the geos that we sell in or at least have the majority of our business in is different.

If I try to peel it apart and look at a more comparable Americas business, versus Twilio and the growth that we see in the underlying API business-specific to messaging. The comparison is that the gap is not nearly as large as one might look at, at the very highest of levels. So I think for me as the leader of this business, it's important for [ Sinchers ] to play our game and to win in the markets that we have invested in.

And within the Americas right now, again, the teams are doing a very good job winning new business so that we can shorten or rather lower the customer concentration in that market. We're doing it with a disciplined approach. We're doing it with multi-products so that it provides a higher value to the customers. And we're also within this diversification also being able to address a market that's a bit lower and less price sensitive than what we experienced at the very highest ends of the market.

But is it so that you feel that you are losing market share to Twilio when you meet Twilio?

No, I don't, actually. In fact, I mentioned a lot of the wins -- the good positive wins that we're seeing in Americas and then Asia Pac as good examples, where we, of course, are winning against our competitors. So -- and they happen to be one of them.

Next one is Thomas Nilsson from Nordea.

Since you're spending quite a bit of money investing in your network and your infrastructure, how many of your competitors are investing into the network at such an ambitious level? And how do you view this will differentiate the various players in the CPaaS market in the coming years?

The network infrastructure, maybe that I'm not sure what you're looking at.

Can you repeat the question?

I mean your level of investment in your -- in CapEx is quite high. And how many of your competitors do you see investing at such a high level as you and Twilio? And how do you think this will play out in the market in competitive terms in the coming years? How many of your competitors are really investing in the networks where you are?

Well, I think, first of all, I'm not sure I subscribe to the idea that we have a very high CapEx level, it's around SEK 1.5 billion a year in line with historical depreciation, give and take some change. It is a level we've been at. It's a level we think we will continue to do that. And it's -- don't expect any big changes, at least not material changes in the grand scheme of things. When it comes to our competitors, I can't really comment that and their investment plans.

The other thing I would call out is just on the network connectivity piece, we are -- and this might be what you're talking about, Thomas, is -- we have been investing in the migration from a legacy network to a digital or an IP network. That cost will go away roughly at about mid next year.

Thank you very much. I think that was it for today. Thank you very much to everyone who called in today. We will be back here with Q4 report on the 17th of February. And if you have any questions, feel free to reach out to the IR Department. We are very happy to answer your questions. Once again, thank you very much, and goodbye.