SINCH AB Annual report
2023
Pioneering the way the world communicates
Sinch develops cloud-based digital tools that help businesses engage with their customers and enhance the customer experience.
2 | Sinch Annual Report 2023 |
Contents
4 | About Sinch | 52 | Multi-year review - group |
5 | Why invest | 54 | Consolidated income statement |
6 | Comments from the CEO | 54 | Consolidated statement of comprehensive income |
8 | The year in brief | 55 | Consolidated statement of financial position |
10 | Strategy | 56 | Consolidated statement of changes in equity |
11 | Acquisitions and integration | 57 | Consolidated statement of cash flows |
12 | Customers | 58 | Parent company income statement |
16 | Products | 59 | Parent company balance sheet |
18 | Market | 60 | Parent company statement of changes in equity |
20 | Operating segments | 61 | Parent company statement of cash flows |
24 | Share performance and ownership structure | 62 | Financial notes |
26 | Sustainability | 100 | Sustainability notes |
29 | Message from the Chairman of the Board | 117 | Auditor's opinion - Sustainability report |
30 | Corporate governance statement | 118 | Certification and signatures |
36 | Board of directors and executive management | 119 | Auditor's report |
39 | Auditor's report - Corporate governance statement | 123 | Definitions |
40 | Risks and risk management | 125 | Annual general meeting, terms |
45 | Management report | and acronyms, addresses | |
While every care has been taken in the translation of this Annual Report, readers are reminded that the original Annual Report, signed by the Board of Directors or in European Single Electronic Format (ESEF), is in Swedish.
Sinch Annual Report 2023 | 3 |
About Sinch
About Sinch
Sinch is pioneering the way the world communicates. More than 150,000 businesses - including many of the world's largest tech companies - rely on Sinch's Customer Communications Cloud to improve customer experience through mobile messaging, voice and email. Sinch has been profitable and fast-growing since it was founded in 2008. It is headquartered in Stockholm, Sweden, with shares traded at NASDAQ Stockholm: XSTO:SINCH. Learn more at sinch.com.
North America | 23% | EMEA | ||
58% | Share of total net sales | 58% | Share of total net sales | 23% |
Share of employees1) | 30% | |||
Share of employees1) | 34% |
LATAM | 14% | APAC | ||||
5% | ||||||
Share of total net sales | 5% | Share of total net sales | 14% | |||
Share of employees1) | 25% | |||||
Share of employees | 1) | 11% | ||||
- Employees excluding consultants (FTE) as of 31 December 2023. ) Employees including consultants (FTE) as of 31 December 2023.
150,000+ | 60+ |
customers | countries with local presence |
4,200+ | 800+ |
employees at year-end 20232) | billion customer interactions per year |
- messages, voice calls and emails |
4 | Sinch Annual Report 2023 |
Why invest
Why invest
Global market
Sinch is a leading provider in the vast and expansive global market for cloud communications services (CPaaS) which is fueled by digitalization and businesses' increasing focus on customer experiences. We enable businesses to interact with their customers in ways that are efficient, immediate, personalized and appreciated.
Differentiated offer
More than 150,000 businesses leverage Sinch APIs and software applications to communicate with their custom- ers. We service many of the world's largest and most demanding enterprises and deliver more than 800 billion mobile messages, voice calls and emails each year.
Profitable growth
Sinch has been profitable since we were founded in 2008. We are actively driving the consolidation of our industry and look to grow both organically and through acquisi- tions. We have active owners and an inclusive company culture with the common goal of having a leading position in our industry.
Adjusted EBITDA per share1), RTM
SEK 5.0
4.0
3.0
2.0
1.0
0.0
2019 | 2020 | 2021 | 2022 | 2023 |
- Sinch has a financial target decided by the board to grow Adjusted EBITDA per share by at least 20 percent per year. Adjusted EBITDA is an Alternative
Performance Measure (APM) that is reported to clarify performance in underlying operations. The chart above shows the development of this APM over time. See also Definitions, pages 123-124.
Sinch Annual Report 2023 | 5 |
Comments from the CEO
Introducing our Growth Acceleration Plan
A year of solid financial results
We are proud of our strong financial performance in 2023. Sinch delivered close to SEK 29 billion in net sales, SEK 3.6 billion of adjusted EBITDA and SEK 1.8 billion in cash flow from operating activities. Operating leverage reduced further with year-end Net debt/Adjusted EBITDA at 2.0x compared to 2.7x one year prior.
Furthermore, we took an important step forward in our sustainability pursuits when we committed to emission reductions in line with the Science Based Targets initiative (SBTi). Joining SBTi ensures that our climate actions contribute to limit the global temperature rise to 1.5 °C.
2023 also marked the beginning of a new chapter for our company as we launched a comprehensive Growth Acceleration Plan and prepared for a new global organization that went live 1 January 2024.
The new organization went live on 1 January 2024. Our customer-facing teams are now organized into three strong regions - the Americas, EMEA and APAC. We have tasked our regional sales teams to sell the entire Sinch portfolio and find the most attractive solution for each unique customer.
We have organized our product, technology and marketing teams into global functions to accelerate product integration and reallocate capital towards high growth areas. We have also created global support functions like Finance and HR, to ensure that we leverage our size and gain economies of scale.
Finally, we are making significant investments to better leverage internal data and harmonize our systems landscape for ERP, CRM and HRIS.
Unlocking potential from acquisitions
I joined Sinch in April 2023 to improve our operating performance and reaccelerate our growth after a period of focusing explicitly on cost control and cash flow.
The market had changed dramatically in early 2022 after a long period of exceptional organic and acquired growth, which had established Sinch as a global leader in the market for cloud communications services. By mid- 2023, it was very clear that measures taken in 2022 were positively affecting profitability and cash flow, but it was also very evident that the business had not yet leveraged the strategic advantages secured through M&A in prior years. Unlocking this potential became our compass and triggered work to adapt our organization and prepare our teams for changes in 2024.
Organizing around our customers
Four key design principles guided our work as we transitioned from business units into a more integrated operating model. We wanted to organize with our customers' needs in mind, to enable distributed decision making, to leverage the scale and efficiency of our global organization, and to allow distributed P&L ownership.
Strong fundamentals
The business we are setting out to transform is built on core values and strong fundamentals.
We task ourselves to Dream Big, Win Together, Keep it Simple, and Make it Happen - core values that define how we interact and meet our customers' needs.
We serve some of the world's largest and most demanding customers. Many of the world's largest tech companies trust and depend on our Customer Communication Cloud for interaction with their customers through mobile messaging, voice calls and email. This is an enviable starting point, especially considering that most customers today only use one of our products. The products we offer are engineered for scale and handle hundreds of billions of unique customer interactions each year. We are uniquely well placed to serve the global and complex needs of multinational enterprise customers. Also, our online self-service offerings allow us to serve a long tail of software developers and business users - more than 150,000 in total - where we enable new businesses to get started and use our products within a few minutes.
Our long-time commitment to profitable growth makes us financially strong and resourced to adapt our business to evolving market needs.
6 | Sinch Annual Report 2023 |
Comments from the CEO
Dream Big, Win Together, Keep it Simple, and Make it Happen are core values that define how we interact and meet our customers' needs.
I am also very pleased with the breadth of competence in our new global leadership team. Some members bring important perspectives and knowledge from Sinch and our former acquisitions while some are new to Sinch, and bring deep expertise from success in their respective remits.
Executing on strategy
We initiated significant changes in 2023 and the work continues in 2024. We are creating a more integrated business where we can focus more on our customers, and we are identifying efficiencies to fund growth investments. Our plan will secure our market leadership position for the long term.
Finally, I want to take this opportunity to thank our customers for your trust, our employees for your hard work, and our shareholders for your continued support. Sinch is pioneering the way the world communicates. I am encouraged by the progress that we have made thus far, and I am excited about the future .
Laurinda Pang
CEO
Stockholm, April 2024
Sinch Annual Report 2023 | 7 |
The year in brief
The year in brief
+4% | +8% | 38% | +11% |
growth in net sales | growth in gross profit | of gross profit translated | growth in EBITDA |
compared to 2022 | compared to 2022 | into Adjusted EBITDA1) | compared to 2022 |
- Adjusted EBITDA is an Alternative Performance Measure (APM) that is reported to clarify performance in underlying operations. See Definitions on pages 123-124 and Note 4 for more information.
First quarter
- Credit facilities of SEK 6,500m and USD 110m were extended by one year. The new maturity date is February 2026.
- Sinch launched "Operator Connect for Partners" which makes it possible for service providers and other partners to offer voice calling services via Microsoft Teams.
Second quarter
- Laurinda Pang acceded as the new CEO of Sinch on 17 April.
- Sinch was named a leader in IDC MarketScape for CPaaS.
-
Sibito Morley was appointed the new Chief Data and
Transformation Officer on 6 June. - Sinch launched AI-powered Smart Conversations that provides business customers with invaluable insights into customer journeys and customer intent.
- The cost reduction program initiated in July 2022 achieved gross savings of approximately SEK 360m on an annual basis, exceeding the target of SEK 300m.
Performance per operating segment 2023
Net sales | Gross profit | Adjusted EBITDA1) | |||
7% | 14% | 15% | |||
6% | |||||
33% | |||||
22% | 14% | 41% | |||
18% | |||||
65% | |||||
31% | 34% | ||||
Messaging | 65% | Messaging | 41% | Messaging | 33% |
Voice | 22% | Voice | 31% | Voice | 34% |
6% | 14% | 18% | |||
SMB | 7% | SMB | 14% | SMB | 15% |
1) Excluding a negative contribution of SEK -606m from "Other" segment. See Note 4.
8 | Sinch Annual Report 2023 |
The year in brief
Third quarter
-
Sinch was named as a leader in the first-ever Gartner
Magic Quadrant for CPaaS. - Sinch MessageMedia announced that two-way SMS capabilities have been integrated with Zoho Desk and the
HubSpot Service Hub. - Sinch launched a new product for Elastic SIP Trunking, which was made available in an open beta version. The product is a complement to existing voice services and allows business customers to easily buy flexible voice capacity via sinch.com.
Fourth quarter
- Sinch announced a new operating model to accelerate its organic growth. The new model increases the focus on customers, unlocks cross- and upselling, and leverages the company's global scale in Product and R&D.
- Julia Fraser was recruited as new EVP Americas.
-
Research firm Omdia named Sinch a Leader in the Omdia
Universe: CPaaS Platform Providers. - Sinch committed to short- and long-term emission reductions in line with science-based net zero and the
Science Based Targets initiative (SBTi). By joining SBTi,
Sinch will ensure that its climate action is aligned with the latest science aimed at limiting the global temperature rise to 1.5 °C. - Credit facilities of SEK 1,500m were extended in December by one year. The new maturity date is February 2025.
Financial targets and outcomes
Target | Outcome | |
20 percent annual growth | Adjusted EBITDA per share | +14% |
in Adjusted EBITDA per share | grew by 14 percent in 2023 | |
Net debt of <3.5x | Net debt/adjusted EBITDA | 2.0x |
Adjusted EBITDA over time | was 2.0x at year-end |
Gross profit and Adjusted EBITDA | Adjusted EBITDA/gross profit | ||||||||||||||
SEKm | % | ||||||||||||||
10,000 | 60 | ||||||||||||||
8,000 | 50 | ||||||||||||||
40 | |||||||||||||||
6,000 | |||||||||||||||
30 | |||||||||||||||
4,000 | |||||||||||||||
20 | |||||||||||||||
2,000 | |||||||||||||||
10 | |||||||||||||||
0 | |||||||||||||||
0 | |||||||||||||||
2019 | 2020 | 2021 | 2022 | 2023 | 2019 | 2020 | 2021 | 2022 | 2023 | ||||||
Gross profit | Adjusted EBITDA |
Sinch Annual Report 2023 | 9 |
Strategy
Strategy for profitable growth
Sinch develops cloud-based technology that enables businesses to engage with their customers and create a better, digital customer experience. Our ambition is to pioneer the way the world communicates and to be a consolidating force
in our industry.
Our three strategic priorities
1 | Customer first |
We organize around our customers to ensure that each unique cus- |
tomer is presented the most relevant products and can quickly reach measurable business outcomes. We operate both sales and product led growth motions and sell both direct to customers and through partnerships. We strive to have a product offering that is built to scale yet adaptable in its implementation.
Differentiated product offering
2 We reduce complexity by enabling businesses to leverage both established and emerging communications channels to interact with their customers. We design our products for global scale and handle hundreds of billions of mobile messages, emails, and voice calls each year. Our global Super Network enables secure and reliable delivery, at lower latency, which is a key point of differentiation as we minimize the reliance on unnecessary intermediaries. We serve both small and large businesses and ensure that our offering can be consumed both through code, via APIs, and through turnkey applications for business users.
Integration and transformation
3 Sinch has built a leading, global position through organic investment and complementary acquisitions. We are now strengthening our business by transforming our Go To Market capabilities, unifying our product offering, and through investment in our internal, digital backbone. These initiatives aim to accelerate our organic growth, and to ready our organization for future acquisitions. We also invest in next-generation, conversational messaging technologies and leverage Artificial Intelligence to drive measurable business outcomes.
10 | Sinch Annual Report 2023 |
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Disclaimer
Sinch AB (publ) published this content on 22 April 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 22 April 2024 13:31:02 UTC.
