LINK Mobility : Q1 Interim Report 2024

LINK Mobility Group Holding ASA

Interim financial report First quarter 2024

13 May 2024

linkmobility.com

Highlights first quarter

• Revenue NOK 1 672 million, organic growth in fixed currency 20%
• Gross profit NOK 356 million, organic growth in fixed currency 11%
• Adjusted EBITDA NOK 158 million, organic growth in fixed currency 17%
• • Adjusted EBITDA reduced by a NOK 9 million bad debt provision in the quarter
• High cash reserve NOK 3.4 billion
• • Leverage at 1.1x with strong cash flow offsetting effect from share buybacks
• Growth and disciplined capital deployment.
• • M&A pipeline discussions continuing as expected
  • Prioritizing 11 actionable targets with EBITDA potential up to EUR 40 million

Total operating revenues NOKm		Adjusted EBITDA NOKm
NOK million		NOK million

Customer accounts			Net retention rate in fixed currency
'000				NOK million
0	0	0

LINK Mobility Holding Group ASA

Profitable growth ahead of market trends

LINK Mobility (LINK) reported revenue of NOK 1,672 million, growing 25% in first quarter 2024 with FX tailwind. Organic revenue growth in fixed currency was 20%. Gross profit and adjusted EBITDA were reported at NOK 356 million and NOK 158 million respectively, with organic growth in fixed FX at 11% and 17%. Organic adjusted EBITDA growth was reduced by an atypical bad debt provision in the quarter. High Q1 24 cash reserve at NOK 3.4 billion and low leverage, as measured by net debt to adjusted EBITDA, at 1.1x. Remaining EUR bond, maturing in December 2025, to be refinanced within a conservative leverage policy of 2 - 2.5x adjusted EBITDA when appropriate, providing ample financing capacity for LINK's disciplined M&A strategy.

The strong balance sheet enables LINK to continue its proven track record of inorganic growth with more than 30 acquisitions completed in Europe during the last decade. There is substantial scope for further accretive inorganic EBITDA growth through multiple arbitrage transactions in a still highly fragmented industry. Discussions across a diverse M&A pipeline are ongoing and constructive. Smaller bolt-ons in existing markets are a priority to realize further scale, whilst the pipeline also includes several level-up opportunities in both Europe and beyond.

Reported revenue increased 25% YoY to NOK 1,672 million in the first quarter, with organic revenue growth at 20% in fixed FX. Underlying growth was driven by organic revenue growth of 39% for the Global Messaging segment and 14% for the European enterprise segments as growth trends continued into the first quarter.

Gross profit grew 15% to NOK 356 million in Q1 24 with an organic gross profit growth in fixed FX of 11%. Gross margin for the European enterprise segments was relatively stable at 26%, whilst theoverall gross margin declined YoY with a higher share of revenue from the low margin Global Messaging segment. Underlying customer margins were stable.

Adjusted EBITDA increased 22% to NOK 158 million in the first quarter, with organic growth at 17% in fixed FX. Cost initiatives completed in Q1 last year and scalability drove high organic adjusted EBITDA growth despite an atypical bad debt provision of NOK 9 million in the quarter. The provision also resulted in a slightly lower adjusted EBITDA margin YoY.

LINK's recurring and growing business is driven by more than 50,000 loyal customers continuing to increase

their usage. The industry continues to observe increased adoption rates for digital messaging and traction on higher margin CPaaS solutions. A highly scalable business model drives higher organic adjusted EBITDA growth compared to organic gross profit growth.

Total reported messaging volumes increased by 20% in the first quarter and less than revenue growth in fixed FX reflecting a higher average price per message. Higher priced new OTT (richer content internet distributed) channels, which improve ROI for clients compared to traditional one-way SMS messaging (telco distributed), continued to gain traction in selected markets. For other messaging, a lower transactional email volume was not fully offset by strong growth from new OTT channels.

SMS One-way messaging (mill messages)

Other messaging (mill messages)

LINK Mobility Holding Group ASA

LINK well positioned for value generation in 2024 and beyond

LINK has a transparent and highly cash generative European business with a large and diverse customer base. The business is supported by a very low customer churn and a high and growing contract backlog. Beyond its recurring nature, LINK sees a significant upsell and new sale potential from higher margin multi- channel / two-way messaging solutions in Europe.

The proceeds from the divestment of Message Broadcast enables LINK to fast-track accretive M&A, leveraging its proven track record for inorganic growth with more than 30 acquisitions completed in Europe the last decade. There is a substantial scope for inorganic EBITDA growth through multiple arbitrage use of proceeds in a still highly fragmented industry. The M&A approach is to be disciplined, accretive and opportunistic within the framework of a conservative financial policy. The remaining EUR bond, maturing in December 2025, is to be refinanced with net debt in the 2 - 2.5x adjusted EBITDA range, well below to the current incurrence test at 3.5x adjusted EBITDA.

LINK's European business has delivered a historical organic gross profit growth in the high single digits As the business is highly scalable, organic adjusted EBITDA growth is expected to be higher than organic gross profit

growth.

LINK's ambitions remain with several potential level-up cases in both Europe and beyond. Smaller bolt-ons in Europe is however a priority to realize further scale. The M&A pipeline holds an additional EBITDA potential of more than NOK 200 million in Europe alone.

New agreements signed in first quarter 2024

LINK signed 802 new and expanding agreements in the first quarter, securing significant new revenue and future growth potential. The new agreements consisted of 584 signed direct customer contracts, 13 signed partner framework agreements and 205 new partner customers.

Market trends towards advanced solutions

Market adoption for selected CPaaS products are accelerating as observed by LINK's new contract wins

In the market for notification use cases, applied for essential information, there is stable demand and underlying growth momentum estimated in the high single-digits. Growth is driven mainly by alerts, reminders, payment and security products while demand for two-factor authentication (2FA) use cases are stable.

Mobile marketing use cases are increasingly adopting new channels. Demand for new channels with a richer feature set, like RCS and WhatsApp, and marketing automation solutions are accelerating and use cases are evolving from one-way mass communication to more conversational solutions. European retail markets however remain negatively affected by macroeconomic uncertainty.

Customer service is posting strong growth from a lower base contributing about 10% of group revenue. Parts of IVR (automated telephone systems) are being replaced by messaging services. Due to large cost saving potentials and enhanced consumer interaction through chatbots, customer service use cases could be counter cyclical.

LINK Mobility Holding Group ASA

Financial Review

(Figures in brackets refer to the same period last year)

Following the divestment of Message Broadcast LLC completed on January 3rd, 2024, the US subsidiary is

reported as discontinued operations in the profit and loss statement and as assets held for sale in the balance sheet in all prior period comparatives. Please refer to note 9 for details.

Group income statement

Total operating revenue amounted to NOK 1 672 million (NOK 1 333 million) or a reported growth of 25% versus the same period last year. Organic revenue growth in fixed currency was 20% with currency translation effects in the quarter of NOK 78 million related to depreciation of NOK against most foreign currencies.

Enterprise revenue growth was NOK 153 million or 14% in fixed currency reflecting a healthy growth momentum from existing and new clients across the footprint. As in the previous quarter we observed solid growth momentum in Western Europe while improved growth momentum was observed in Central Europe driven by larger clients. The market continue to develop towards multi-channel conversational messaging including channels with richer feature sets improving conversion rates in retail campaigns and supporting customer interaction in clients value chains reflected also in closed won contracts on such solutions.

Solid volume growth in the Global messaging segment translated into revenue growth of NOK 108 million or 39% YoY in fixed currency.

Total operating revenues (mNOK)		Gross profit and gross margin (%)
NOK million	NOK million

Gross profit reported at NOK 356 million or a growth of 15% while growth in fixed currency was NOK 33 million or 11% for the quarter. Gross profit growth momentum in the Enterprise segments was 11% and in the high end of expectations as Western Europe displayed continued strong growth momentum into 2024 though compared to a softer period beginning of same quarter last year.

Reported gross profit growth in Global Messaging in fixed currency was NOK 1 million or 5% YoY. The margin in the Global Messaging segment remained fairly stable QoQ and is expected to remain in the historical high single digit level.

The total Group gross profit margin was reported at 21.3% (23.2%). The reduction in margin was related to the higher share of revenue from the low-margin Global Messaging segment compared to same quarter last year. The enterprise gross margin eroded by 0.7 percentage points YoY to 26.0% related mainly to strong growth with large clients at lower margin partly offset by positive impact from higher margin OTT channels such as RCS and What's App

LINK Mobility Holding Group ASA

Total operating expenses amounted to NOK 197 million (NOK 178 million) or a reported growth of 10% compared to same quarter last year. In fixed currency total operating expenses increased by 6% negatively impacted by a NOK 9 million bad debt provision in the Global Messaging segment linked to two specific aggregator clients.

Underlying inflationary pressure and other cost increases was partly offset by remaining cost initiatives initiated across the European footprint late 2022 and impacted reported OPEX YoY by NOK 4 million in fixed currency in the first quarter and down from NOK 12 million in the previous quarter.

Adjusted EBITDA, before non-recurring cost, was reported at NOK 158 million (NOK 130 million) or 9.5% of total revenues (9.8%). In fixed currency the growth in adjusted EBITDA was 17% or NOK 22 million driven by gross profit expansion of NOK 33 million partly offset by NOK 11 million growth in operating expenses.

Gross profit to adjusted EBITDA conversion was reported at 45% (42%).

Operating expenses		Adjusted EBITDA and margin (%)
NOK million		NOK million

EBITDA after non-recurring items was reported at NOK 140 million (NOK 117 million) after deduction of non- recurring cost of NOK 19 million (NOK 13 million) related to acquisitions, share option programs and restructuring costs. The non-recurring costs related to restructuring was recorded at NOK 2 million (NOK 4 million) mainly related to severance agreements. M&A costs was NOK 3 million in the quarter (NOK 2 million) mainly related to US divestment. Costs related to share-options was reported at NOK 14 million (NOK 7 million) and the increase was mainly related to higher recognized social contribution costs impacted by share price increase. Share-option costs recognized relates only to new LTIP programs from 7 December 2022 and bonus shares linked to employee share option programs.

First quarter depreciation and amortization expense were NOK 83 million (NOK 77 million). The increase compared to same quarter last year is mainly attributable to the effect of foreign exchange translation on intangible assets (NOK 3 million). The remaining increase is related to increased depreciation related to completed projects during the quarter (NOK 3 million).

Net financial income was NOK 283 million (negative NOK 71 million). The YoY change was largely related to a net currency gain (NOK 228 million) compared to a net currency loss in the same period last year (NOK 32 million). Most of the currency gain relates to historical foreign exchange effects recorded through OCI from the US subsidiary (NOK 197 million). As a result of the disposal of this entity, these effects are reversed and flowed through the profit and loss. Net interest expense is comparatively lower as bond interest is partly offset by increased interest income from cash deposits and interest received from bond loans owned.

LINK Mobility Holding Group ASA

Balance sheet and cash flow​

All comparative figures presented in the balance sheet and related to the US subsidiary are presented under

their respective balance sheet line items as "available for sale "

Non-current assets amounted to NOK 7 149 million (NOK 6 526 million). The two largest components of non- current assets are goodwill and other intangible assets. Goodwill is comparatively higher because of currency revaluation; other intangible assets are also revalued for currency but are also amortized and hence have a declining profile as compared to the prior period ​ Prior year comparative goodwill and other intangible assets related to the US subsidiary are removed and presented together with net current assets held as available for sale (NOK 2 856 million). The investment in bonds is representative of the repurchase of EUR

22 million of our own bond outstanding and other long-term receivables include the seller note and earn-out component from the sale of the US subsidiary totaling NOK 400 million; refer to note 9 for details.

Trade and other receivables amounted to NOK 1 451 million (NOK 1 185 million). The impact from changes in foreign currency exchange rates is positive NOK 35 million YoY. The remainder of the increase is driven by organic growth and timing of collections. In the prior year, trade and other receivables related to the US subsidiary were NOK 92 million and are presented with current assets held as available for sale.

Trade and other payables were reported at NOK 1 567 million (NOK 1 215 million). The impact from changes in foreign currency exchange rates is positive NOK 25 million YoY. As for trade and other receivables, the increase is driven by organic growth and timing of payables. Prior year trade and other payables held by the US subsidiary and deferred tax liabilities comprise the amount presented as short-term liabilities held as available for sale.

​Total equity amounted to NOK 6 0 million (NOK 0 million) or 7 ( 7 ) ofbalance sheet value. The increase was mainly related to foreign exchange effects (negative NOK 456 million) offset byeffects of the net investment hedge (NOK 42 million) and the ongoing purchase of own shares (NOK 40 million). Changes in other equity, such as share based payments, quantify the remaining difference.

​Long-term liabilities amounted to NOK 4 600 million (NOK 4 504 million). The largest components are external debt through a bond loan and deferred tax liability. External debt issubject to currency adjustment which is the main driver for the increase (NOK 152 million) Deferred tax liabilities declined YoY by NOK 33 million; the decrease is related to amortization of intangible assets.

Short-term liabilities, which include trade and other payables, amounted to NOK 1 733 million (NOK 1 613 million). Short-term borrowings are representative of accrued interest on the bond loan. IFRS 16 lease liabilities (current) are slightly higher due to currency revaluation and tax payable has increased by NOK 88 million because of tax exposure in jurisdictions with increase taxable income from the prior year. Tax payable includes a NOK 63 million accrual related to the sale of the US subsidiary.

​Net cash flow from operating activities was NOK	million (NOK36 million). Organic growth combined with
working capital release are the main contributors to improved cash flow from operations.
​Net cash from investing activities was NOK 7	million (negative NOK 1 million). The proceeds from the

sale of the US subsidiary represents the significant increase in net cash flows from investing activities with NOK 2 208 million. Capital expenditures in tangible and intangible assets increased YoY from timing.

Net cash flow from financing activities was negative NOK 169 million (negative NOK 4 million). In Q1 2024, a total of EUR 12 million of bonds were repurchased (NOK 138 million); there were no bond re-purchases in the same quarter last year. Share repurchases contribute to the increased negative comparative (NOK 40 million).

Total cash and cash equivalents were NOK 3 363 million at the end of the quarter (NOK 934 million).Receipt of USD 220 million from the sale of the US subsidiary directly contribute to the increase. In the prior year, the US subsidiary held NOK 30 million at year-end; this is presented as part of current assets held as available for sale.

LINK Mobility Holding Group ASA

Condensed consolidated income statement​

LINK Mobility Holding Group ASA

Condensed consolidated statement of comprehensive income

LINK Mobility Holding Group ASA

Condensed consolidated statement of financial position

N	K			Note					ear
Assets
Non c rrent assets
oodwill					0 0		06		70
Other intangible assets		76			0	77	60
Right of use assets			6	600
Equipment and fi tures				0	7	0
eferred ta	assets			0 7	7
Investment in bonds
Other long term receivables	0	76		6
Non c rrent assets
	rrent assets
Trade and other receivables		0 7		0	0
Cash and cash equivalents	6				0 6	6
Current assets held as available for sale			7			0
	rrent assets
otal assets
	ity & Lia ilities
Shareholders equity		6	0	07 7	0		0
otal e	ity
Long ter	lia ilities
Long term borrowings			7 6	6		00	0
Lease liabilities			7
eferred ta	liabilities		6		0	66	7
Other long term liabilities			6	00	6
otal non c rrent lia	ilities
	ort ter	lia ilities
Borrowings	short term			7				7
Lease liabilities			7 6	0
Trade and other payables	67	6			6
Ta	payable			07	0 0		0
Short term liabilities held as available for sale			6		6
otal c	rrent lia ilities
otal lia	ilities
otal lia	ilities and e	ity

LINK Mobility Holding Group ASA