LINK Mobility Group Holding ASA (LINK) Earnings Call Transcript

Hi, and welcome to LINK Mobility's Second Quarter Presentation. My name is [Kristian Niegel ], and I'm the IR and Corporate Strategy Manager here at LINK. Joining me today are our CEO, Thomas Berge; and our CFO, Morten Edvardsen. We'll start with the presentation, and afterwards, we'll open up for questions. Please feel free to post your questions online at any time during the session. With that, I'll hand it over to our CEO, Thomas Berge.

Thank you for the introduction, [Kristian]. This year marks a major milestone for LINK Mobility as we celebrate our 25th year anniversary. We began in 2000 as a small Norwegian start-up and have grown into the European market leader in digital messaging, now trusted by more than 55,000 customers. Our strategy is dedicated to providing digital communication products to the enterprise market for them to interact with their end customers. We approach the enterprise market through a strategy of local touch points with our clients. We have numerous sales reps, customer service and customer success employees on the ground winning new contracts and supporting existing clients in local language and culture. This setup is creating a larger reach than many of our competitors who have a more regional or centralized approach to the market. Over the years, we have built a pan-European presence. We are the #1 provider in Europe for A2P messaging with a customer base that relies on our services on a recurring basis. Today, we have more than 700 employees across over 30 offices, a presence in 18 countries and have completed more than 35 acquisitions since 2014. If you look at the map on the right-hand side, you can see the breadth of our footprint and the acquisitions that have helped us get there. Our growth story has been driven by a combination of strong organic growth and targeted strategic acquisitions. Profitability has always been a key priority. LINK is growing the business while generating additional profitability and cash. Since 2014, we have expanded steadily across Europe, completing over 35 transactions to strengthen our position. Looking at our journey, you can see key moments in our history. Nordic expansion between 2012 and 2015. The European expansion from 2016. The acquisition by Abry Partners in 2018 and our relisting at the Oslo Stock Exchange in 2020. In 2025, we expanded beyond Europe, once again with the acquisition of South Africa's SMSPortal. This marks a renewed and deliberate step into international markets aligned with our long-term growth ambitions. The combination of strong market leadership, long-term customer relationships and strategic expansions lay foundations for continued growth in the years ahead. Q2 was a strong quarter for LINK, delivering both solid growth and important strategic progress. The highlight this quarter was the acquisition of SMSPortal, a market leader in South Africa. This is a transformative step that lifts our pro forma adjusted EBITDA and cash EBITDA to NOK 1.1 billion and NOK 0.9 billion, respectively. The transaction was agreed at an attractive upfront multiple of 4.6x cash EBITDA with an additional conditional payment of up to USD 30 million. Regulatory approval is progressing as planned, and we expect closing in early September. Turning to our financials. Pro forma gross profit, including SMSPortal is reported at over NOK 500 million in the second quarter, representing 7% year-over-year growth despite challenging comparables. This performance was driven by continued strong demand for our high-margin conversational solutions combined with OTT channels and chatbots. A handful of large enterprise clients reduced noncritical communication spend during the quarter, which we estimated lowered growth momentum by 2 to 3 percentage points. Similar patterns have been observed in previous years, typically following periods in which these customers have significantly increased their communication spend with LINK as has been the case in the recent years for the mentioned clients. The impact is generally temporary, and we expect this headwind to ease by year-end. The underlying market trends remain strong with continued support for growth in richer messaging channels with higher profitability. Pro forma adjusted EBITDA is reported at NOK 283 million or a growth of 12%, in line with our stated performance targets. LINK's business model is scalable, meaning that most of the gross profit increase is hitting the EBITDA figure. Pro forma margin is also increasing from 11.3% to 13.8% or a growth of 2.5 percentage points. Improvement in margins is a result of the accelerated growth momentum on high-margin conversational products, traffic mix in Europe and a profitability increase in SMS portal. The quality of our revenue continues to improve with gross profit growth outpacing revenue growth due to strong demand for advanced solutions with higher margin and strong comparable same period last year for selected customer with low-margin, high-volume traffic. Lastly, CPaaS momentum is accelerated in the quarter. We saw record-high closed won contracts at NOK 50 million in gross profit terms. For the first time, CPaaS contract wins exceed ATP contracts. RCS contracts were up fourfold, now representing 24% of total wins. The chart at the bottom right illustrates the growth in expected gross profit for won CPaaS contracts over the past 5 quarters, with a clear increase in Q2. Overall, Q2 shows we are executing on both growth and profitability while strengthening our market position and expanding our global footprint. In Q2, we signed the acquisition of SMSPortal, the leading player in South African messaging market with a strong international customer base. This acquisition establishes a leading position for LINK in South Africa, supported by a robust technology platform, a scalable and profitable business model and contain competitive pressure with relatively few stronger local and international competitors. South Africa represents an attractive and growing market with predictable regulatory framework. SMS is still the primary communication channel. The country also benefits from a stable regulatory environment and a growing digital economy, creating strong demand for scalable communication solutions. The transaction also opens substantial opportunities for synergies and accelerated growth. We see the potential to grow the SME customer base, expand into underpenetrated sectors and introduce our high-margin CPaaS products to address local market demand. In addition, integrating SMSPortal's technology platform into LINK's existing operations will strengthen our capabilities and efficiency. All of this comes at an attractive valuation of 4.6x cash EBITDA on upfront consideration or 5.8x, including the maximum conditional payment. We are confident SMSPortal will be a powerful growth driver within the LINK family. The transaction is expected to close early September after regulatory approval. In Q2, we delivered profitability improvements with pro forma adjusted EBITDA up 12% in stable currency and continued margin expansion. Pro forma adjusted EBITDA reached NOK 284 million in reported currency, with the margin improving to 14%. SMSPortal's highly scalable and efficient operations, combined with higher growth on the more advanced products with higher profitability in Europe and the decline on low-margin traffic in Global Messaging are driving the margin increase. The organic footprint delivered 11% growth with our scalable business model, enabling gross profit growth to flow effectively through to EBITDA. We also saw a slight decline in OpEx compared to the higher levels same period last year. Pro forma gross profit grew 7% in stable currency, including the contribution from SMSPortal. This performance was driven by continued growth in high-margin conversational solutions and favorable traffic mix. Looking at the organic footprint, growth was 5% in stable currency. The mid-single-digit growth rate reflects the impact from elevated comparables against a campaign-driven peak in the same quarter of last year as well as the temporary effect of reduced spend from the before-mentioned handful of enterprise clients estimated to have lower growth momentum by 2 to 3 percentage points. As we have seen in the past, such adjustments typically follow periods of significant increases in communication spend and are temporary. We expect this headwind to fade out by year-end. On new contract wins, Q2 delivered a record performance, reaching an all-time high estimated gross profit value of NOK 50 million. 52% came from CPaaS solutions, highlighting the shift in our contract mix towards higher-value channels. The graph on the left shows the estimated annualized gross profit on new contracts. The numbers are extracted from our CRM system and the estimations are based on contractual arrangements and specific dialogue with clients. Internally, we have a target of achieving NOK 40 million plus in gross profit from new contracts per quarter, except Q3, which will be lower due to summer break. Looking at the breakdown, gross profit from new CPaaS contracts increased 60% year-over-year to NOK 25 million. This growth resulted in CPaaS representing a larger share of new wins than traditional A2P SMS. New contracts on A2P declined as customers shifted towards richer and more advanced messaging solutions. Conversational OTT solutions were a key driver of the CPaaS momentum in the quarter. They represent the majority of the CPaaS contract closed with OTT contract wins up NOK 7 million. RCS contracts were up 4x NOK 12 million in gross profit, supported by major wins in banking, insurance and further momentum coming from supermarkets, retail and e-commerce. LINK Mobility is a growth company, positioned to benefit from two key trends: the ongoing increase in adoption rates for A2P SMS and the shift towards more advanced solutions on OTT channels. If we start with the adoption rates on the left-hand side. A2P SMS usage has been steadily increasing across all European countries where LINK operates. While the Nordic markets are among the world's most mature in the world, we have still seen growth in this region over the past few years, albeit lower than less mature markets. There remains a strong growth potential in Central and Western Europe. You can see from the chart that A2P SMS adoption per inhabitant continued to increase with an 8% to 10% yearly increase in Central and Western Europe from 2017 to 2024. This ongoing adoption trend provides a solid foundation for LINK's future growth momentum. At the same time, traction on the new CPaaS product is adding another growth layer. The expansion from one-way communication on A2P SMS to conversational dialogue on richer channels such as RCS and WhatsApp are opening up a large amount of new use cases. This means a higher return on investment for clients in mobile marketing campaigns, more value from notifications and more efficient customer interactions. As we saw previously, growth in CPaaS is already well underway. The market is evolving rapidly with a clear shift towards more advanced CPaaS solutions. To capture this demand, it's critical to be channel agnostic, and this is exactly where LINK is strongly positioned. Our MyLink products enable clients to manage all customer engagement in one place, regardless of which channel their end users prefer. This flexibility is becoming increasingly important as the market shifts, ensuring that our customers can always meet their users where they are. In competition, we often see local players who lack the resources to invest in these kinds of solutions. This gives LINK a clear competitive advantage as we can offer more advanced scalable products that deliver higher value. Another important trend that we are observing is the strong push towards WhatsApp. In several regions, WhatsApp has priced its services below operator levels. This strengthens LINK's bargaining power in the industry as we partly can control which channel we terminate messages on. We believe this is an opportunity to further strengthen gross profit growth through lower COGS. This also underlines the importance of being channel agnostic. LINK is well positioned not only to capture these changes, but also to lead the market transition. RCS has become one of the key CPaaS trends in the market and customers increasingly demand compatibility with new messaging formats, LINK's model ensures that we can seamlessly support that shift, positioning us to capture the growing demand for RCS and other emerging channels. RCS is more mature in France, Italy and Germany with higher adoption versus the Nordic region. Less mature SMS markets are taking charge of utilizing the more advanced communication channels like RCS. The Nordic is expected to follow, especially when RCS is compatible with iOS in that region. This slide shows LINK's first RCS pilot in Northern Europe, conducted in collaboration with Gjensidige to improve mileage reporting on cars. The pilot was carried out on Android devices. The use case is simple, Gjensidige want customers to report mileage more accurately. If you drive more than agreed, your compensation in case of a claim is reduced. And if you drive less, your insurance becomes cheaper. RCS makes this reporting much more interactive and convenient for the customers. The pilot results were a very strong success, underscoring both the reach and effectiveness of RCS. On the right, you can see the status of the RCS rollout across Europe, where some countries have RCS limited to Android devices, while others already offer RCS on both Android and iOS. We see market demand increase exponentially when enterprises can reach all end users on RCS, not just Android users. In the Nordics, where iOS penetration is high, our best estimate is that iOS will open up for RCS in Q1 2026. While there is still uncertainty around the exact timing, we view this as a significant growth driver in the years ahead. By the time iOS adoption in the Nordic is possible, LINK will have refined and scaled RCS solutions in other markets. With our strong market share in the region, we are well positioned to capture the potential once the rollout is implemented. LINK Mobility has demonstrated a strong track record of driving growth through value-accretive acquisitions. As illustrated by the acquisitions shown on the right-hand side, our extensive M&A activity has given us significant experience and a clear understanding of key drivers behind successful integrations as well as the pitfalls to avoid. With this experience, we have developed a structured M&A playbook that defines a set of criteria we consider essential for value creation. These criteria have been refined over time and serve as a guiding framework in our evaluation of M&A opportunities. Companies that meet these requirements have consistently shown the highest likelihood of successful integration and long-term value contribution to LINK. We're looking for companies with strong local position and deep industry relationships, a proven ability to generate cash and a resilient customer base. Technological and commercial alignment is key, along with clear potential to realize synergies after the acquisition. Typically, our target valuations are between 6 to 9x cash EBITDA before synergies with upside potential from growth. However, as we saw with SMSPortal, individual transactions might deviate from this range with SMSPortal acquired at 4.6x cash EBITDA or 5.8x, including the maximum conditional payment. Looking ahead to the second half of 2025, our main focus will be to close the acquisition of SMSPortal in South Africa, secure a successful integration and start extracting synergies and growth potential. We see opportunities to grow the SME customer base, expand into underpenetrated sectors and introduce higher-margin CPaaS products to address local market demand. In addition, integrating SMSPortal's technology platform into LINK's existing operations will strengthen our capabilities and efficiency. At the same time, we will continue to execute our broader M&A strategy in Europe, where bolt-on acquisition remains an important lever for growth, allowing us to strengthen our market position and realize additional synergies across the group. When it comes to the current M&A pipeline, we have 8 prioritized targets with 3 in due diligence. The pipeline includes a mix of bolt-on acquisition and larger scale-up opportunity with targets both inside and outside Europe. In total, the pipeline represents more than EUR 15 million in cash EBITDA. Overall, our track record demonstrates that we have successfully executed our M&A strategy. We remain focused on pursuing accretive opportunities and continue to actively monitor the market, maintaining an opportunistic approach as we evaluate potential targets. Our key objective medium term is focused on value creation through a combination of organic growth and accretive M&A. Firstly, when it comes to growth, our ambition is to deliver high single-digit organic gross profit growth. This is driven by the 2 key market trends we discussed earlier, the ongoing increase in adoption rates for our A2P SMS and the shift towards more advanced solutions with higher margins. Naturally, as we have seen this quarter, growth will show some fluctuations from period to period, but the underlying market trends remain strong with continued support from both rising adoption rates and the shift towards richer messaging channels. Secondly, on profitability, we're targeting adjusted EBITDA growth outpacing gross profit growth. This reflects the scalable nature of our business model with gross profit expected to grow faster than operating expenses over time. And thirdly, on capital allocation, our top priority remains accretive M&A while maintaining a leverage policy of maximum 2.0 to 2.5x adjusted EBITDA. This balance allows us to pursue attractive opportunities while preserving financial flexibility. In short, our strategy is about balancing solid organic growth with margin improvements while using disciplined capital allocation to drive additional value through acquisitions. That's it for me. Now we move over to the financial section. Over to you, Morten.

Thank you, Thomas, and good morning to everyone listening in on the call. Let me start with the SMSPortal transaction and the impact on pro forma financials on a last 12 months basis. Firstly, a quick recap on the transaction details. The total purchase price amounts to up to USD 145 million equivalent. This includes $100 million upfront cash payment expected to be fully financed with cash on balance sheet, $15 million in equity consideration and up to $30 million in conditional payments over the next 2 years. The valuation at the time of signing represents 4.6x cash EBITDA on initial cash consideration and 5.8x, including the maximum conditional payment. We see this as an attractive entry point given SMSPortal's strong profitability and growth potential. Looking at the financials for the group on a combined basis in reported currency. The pro forma revenues for the last 12 months reached NOK 8.5 billion. Adjusted EBITDA reached NOK 1.1 billion with an adjusted EBITDA margin of 13% with SMSPortal contributing with its higher margin profile. Cash EBITDA is NOK 0.9 billion, which underlines strong cash generating capacity of the combined group. Following the cash payment of NOK 1 billion for SMSPortal, net interest-bearing debt would stand at NOK 1.9 billion, resulting in a leverage ratio of 1.7x adjusted EBITDA. That is comfortably within our financial policy range of 2.0 to 2.5x, leaving headroom for further inorganic growth. Overall, these acquisitions at scale improves profitability and strengthens our cash generation going forward. Now let's turn to the reported financials for the second quarter. Starting off with revenue and how the shift in revenue mix is impacting profitability. Reported revenues for the quarter came in at almost NOK 1.8 billion, down 3% year-on-year. On an organic basis, revenue declined by 11%, whereas 8 percentage points are explained by Global Messaging, following the termination of low-value clients and destinations since the third quarter last year and the normal volatility that we observe in the aggregator segment. A further 3 percentage points are related to the Enterprise segment, where elevated comparables from campaign peaks impacted year-on-year growth like we observed also in the first quarter this year. One large retail client alone explains around 3 percentage points of the decline due to abnormal volumes last year. In addition, a handful of large enterprise clients have reduced their messaging spend, which dilutes the revenue growth momentum. We expect this headwind to diminish by the end of the year, while new contracts implemented partly offset the decline. Foreign exchange effects of NOK 30 million and contribution from closed and consolidated acquisitions in Portugal, Spain and the U.K. of NOK 107 million bridges the gap between organic 11% decline to the reported 3% total revenue decline in the quarter. Overall, while the top line reflects high comparables and some short-term headwinds, the shift away from low-margin traffic toward higher-margin products is supporting improved profitability. Moving on to churn and net retention metrics. Starting with churn, both Enterprise and Global Messaging remain at normal levels. Global messaging churn spike last year are reflective of LINK terminating low-value clients as a mean to preserve profitability and reduce bad debt risk exposure. The increased demand for more advanced CPaaS solutions further supports current drivers for low churn, such as sticky integrations and high transition costs. Net retention came in at 84% in the quarter. A significant explanation to the reduction in net retention is the termination of low-value traffic within the Global Messaging segment, representing 8 percentage points impact in the quarter, which will normalize in the second half of this year. In addition, the elevated comparables and the volume impact from a handful of large clients impacts net retention development in the quarter. It is important to highlight that while reported net retention has come down, gross profit growth continues to outpace revenue growth. The phasing out of current headwinds, especially on high-volume, low-margin traffic will largely fade out by year-end, which we expect to lead to a normalization of net retention. Our medium-term target for organic gross profit growth in the high single-digit range would -- with a relatively stable revenue mix imply a normalized net retention of around 105%. Then to the next slide on development in gross profit and gross margin. Reported gross profit increased by 11% in the quarter, reaching NOK 422 million. On an organic basis, growth was 5% with closed and consolidated acquisitions contributing an additional NOK 20 million. Organic growth was, as mentioned, influenced by elevated comparables from campaign-driven peaks in the same quarter last year as well as the impact from some large enterprise clients reducing noncritical communication spend, especially on SMS. This created a temporary headwind of around 2 to 3 percentage points, which we expect will diminish by year-end. At the same time conversational solutions supported both gross profit growth and margin expansion. Global Messaging segment delivered a 27% increase in gross profit, equal to NOK 8 million from growth on higher-margin traffic. Looking at gross margin, the group gross margin expanded from 20.9% last year to 24% in the current quarter, reflecting an organic increase of 3.4 percentage points. Enterprise accounted for 1.6 percentage points of the organic uplift, supported by growth on higher-value clients and on advanced CPaaS solutions, including OTT on behalf of lower value traffic. Global Messaging added another 1.8 percentage points positive contribution to the total margin from traffic mix improvements. Moving on to the development in adjusted EBITDA. Reported adjusted EBITDA growth was 18%, reaching NOK 212 million. On an organic basis, growth was 11% in fixed currency, equivalent to NOK 20 million. Of this, NOK 17 million derived from organic gross profit growth, while the remaining NOK 3 million reflects operating expenses being slightly down from a somewhat elevated level last year. In addition, closed and consolidated acquisitions contributed NOK 10 million in the quarter. Adjusted EBITDA margin expanded 2.2 percentage points to 12.1% and was in line with the previous quarter. The improvement is mainly driven by gross margin expansion, as explained, reflecting a more favorable traffic mix and increased contribution from mature OTT channels. We also note that the operating expenses to sales increased as a percentage of revenue, which is a result of the lower top line. Overall, the quarter showed strong organic EBITDA growth and solid margin uplift. Let's now turn to the statement of profit and loss, and I will comment only on material items below adjusted EBITDA, as I already covered the lines above. Nonrecurring costs came in at a higher level of NOK 47 million in the quarter. This includes NOK 28 million related to M&A activity as well as NOK 20 million in option cost, of which NOK 17 million is linked to accruals of social security tax, reflecting the strong share price development in the quarter. This results in an EBITDA for the quarter of NOK 165 million, slightly down year-on-year due to the higher level of nonrecurring costs in the quarter. Depreciation and amortization were NOK 97 million, consisting of NOK 27 million from R&D intangibles, NOK 63 million from acquisitions-related PPA amortization with no replacement CapEx required and NOK 6 million from leasing and fixed assets. Net financial costs were NOK 68 million in the quarter. Out of this, NOK 29 million related to net currency losses, primarily on U.S. dollars and euros. Net interest expense were NOK 30 million and consisted of mainly bond interest of NOK 39 million and amortized transaction cost of NOK 11 million, whereof NOK 6 million related to early recognition due to the termination of LINK01 bond in the quarter. These effects were partly offset by an interest income of NOK 20 million in the quarter. In addition, we recorded NOK 8 million in other financial costs linked to the call premium paid on the LINK01 bond. Moving over to the balance sheet, which remains solid and provides ample capacity for further inorganic growth. Noncurrent assets ended at NOK 6.8 billion and down year-on-year. The main driver for the decline was the termination of the company's own investment in LINK01 bonds amounting to NOK 842 million, which were canceled in Q4 '24. In addition, negative currency effects contributed to the reduction, while partly offset by NOK 405 million add-on from M&A since last year. Receivables were positively impacted by NOK 218 million received related to the divestment of Message Broadcast. This included a settlement of earn-out of NOK 144 million and a partial repayment of the sellers' credit of NOK 74 million. An outstanding balance of NOK 35 million remains on the sellers' credit, maturing early 2027 with a 5% interest payable together with the principal amount. Cash balance stood at NOK 1.8 billion at the end of the quarter and is expected at NOK 800 million post closing of the SMSPortal acquisition, expected early September. Year-on-year, cash is lower due to debt repayment, M&A transactions and the share buyback program. At the same time, gross debt has decreased by NOK 1.5 billion year-over-year following the final refinancing of the LINK01 bond in June 2025. Following the refinancing of LINK01, current debt structure consists of 2 outstanding bonds, LINK02 of EUR 125 million and LINK01 of EUR 100 million maturing in 2029 and 2030, respectively. In addition, we have secured a senior secured working capital facility of EUR 65 million, which provides additional flexibility for inorganic growth. Equity stood at NOK 5.5 billion with an equity ratio of 55%, which underlines the strength of the balance sheet. Net interest-bearing debt was reported at NOK 870 million, and the leverage ratio declined quarter-on-quarter to 1.1x adjusted EBITDA. The received consideration for the divestment of the U.S. business had a positive impact on leverage in the quarter, while M&A activity added 0.1x to leverage. Including the SMSPortal acquisition, the leverage ratio would increase to 1.7x adjusted EBITDA, as mentioned, which remains comfortable within our financial policy range. Moving over to my last slide on cash flow. Adjusted cash flow from operations was 77% of adjusted EBITDA in the quarter or NOK 164 million. Working capital development in the quarter was impacted by a delay in the payment process with a large global client and receivables of NOK 90 million from these clients were settled early July, hence, more than normalizing the negative working capital impact in last 12 months. On an LTM basis, adjusted net cash flow from operations was NOK 757 million, representing a conversion rate of 96% from adjusted EBITDA. CapEx in the quarter was NOK 55 million, including an NOK 11 million out-of-period onetime correction, while underlying increase reflects fast-tracked development of CPaaS solutions due to strong market demand. For the full year, we expect CapEx level at approximately NOK 180 million to NOK 190 million. In the lower graph, we see that beyond organic cash flow impact from M&A and U.S. receivables has a net positive impact of NOK 88 million in the quarter. Cash outflow of NOK 130 million related to acquisitions in the U.K. reflect both net cash consideration and share consideration of NOK 28 million, more than offset by the NOK 218 million cash consideration from the U.S. divestment received in the quarter. Cash outflow related to financing of NOK 862 million in the graph mainly reflects NOK 842 million in cash outflow related to the final refinancing of LINK01 in June, NOK 35 million in proceeds from share issuance, including the NOK 28 million related to M&A and remaining NOK 54 million in interest paid in the quarter. That concludes the financial section and the Q2 presentation, handing the word over to [Kristian] for Q&A.

Then we will start the Q&A session. Please feel free to post questions online at any time during the session. So we have received a question from [ Erik Raftel ] in DNB Carnegie. You note that headwind is expected to diminish by end of the year on GP headwinds from a handful of enterprise clients. Based on what you see today, should we expect a gradual recovery through Q3 and Q4 towards 7% to 8% organic growth rate, excluding these effects? Or could we see organic gross profit growth bounce back to the high single digits already in Q3?

Yes, I can take that. Based on what we're seeing right now, we see, as mentioned, a headwind of 2 to 3 percentage points on these clients. We see them starting to adjust somewhat their spend on the beginning of the year. So we expect this to -- this effect to also impact the second half, so both Q3 and Q4, but sort of fading out. And then we should see a recovery then as these effects are faded out in the beginning of 2026.

Great. And then a new question from [ Erik Raftel ]. Maybe a bit of a disappointment that RCS still hasn't been launched for iOS in the Nordics. Do you have an updated view on when that is likely to happen?

Yes. The feedback from the mobile operators are in the beginning of 2026. Both the mobile operators and LINK rely on Apple basically implementing this in their operating software. So beginning of 2026 is the latest estimate.

And another question from [ Erik ]. For modeling purposes, could you help us understand what type of reported revenue is with the NOK 25 million CPaaS contract wins in Q2?

Yes. Specifically to the contracts sold in Q2, the margin of those were high end, I would say, at 57%. Typically, what we see is between 40% to 50%. So this is, of course, estimates in the Salesforce system. So typically, we see margin ending up at 40% to 50%. There are some higher-margin deals in the mix here. So the revenue linked is then mathematically, it's [ NOK 44 million ].

If we take a few steps back, you've turned the ship, performing very well on organic metrics, seeing accelerated momentum on CPaaS and then a step-up M&A transaction. Is it time for a Capital Markets Day sometime late this year or in 2026?

Thank you. We are thinking about arranging a Capital Markets Day in 2026 actually. We just signed a big acquisition. We expect closing in early September. And we think that it will be best to have a Capital Markets Day when we have a couple of quarters with the sizable -- the new sizable acquisition in the P&L.

Then two more questions from [Erik]. We will start with the first one. What is the effect of cannibalization on A2P from the growth of CPaaS? Would you be able to split what part of CPaaS growth is transitioned from A2P and how much is net new gross profit?

Yes, I can take that one. That's a good question. The answer to this is we expect a little bit of both, exactly how much, it's difficult to say. Some use cases on SMS will transition over to OTT channels and cannibalize existing volumes. For us, that is completely fine because we see that the use cases that are being cannibalized is being cannibalized because customers want to use that as an opportunity to engage with their end customers. So then we will have a dialogue. So there are much more messages and the profitability is much higher. And there are use cases which will not be cannibalized, which are new, which you cannot do on SMS today, which will come as you call net new gross profit. Exactly sort of how much this is, we don't -- it's impossible to calculate it basically.

Yes. And last question from [Erik]. CapEx was up approximately NOK 10 million quarter-over-quarter. Is NOK 55 million a fair run rate going forward? Or is it NOK 40 million to NOK 45 million as we've seen in Q3 '24 to Q1 '25 more representative ahead?

Yes. Just to note that we had the NOK 11 million onetime sort of out-of-period effect in the second quarter. So adjusting for that, we're at a CapEx level of NOK 44 million, which is -- so I would say, yes, NOK 40 million to NOK 45 million is what we expect at least in the second half of the year. So I think that's a fair assumption going forward.

Great. And then moving on to some questions from Petter Kongslie at Sparebank 1 Markets. Can you explain the decline in NRR performance, excluding terminated traffic?

Yes, adjusting for -- I think we explained some of these effects. It's related to the high sort of campaign-driven peaks that we saw same quarter last year and also, obviously, some of the clients which have reduced their spend. This is also impacting the NRR. Just to recap Q2 last year, we had a retail client in Central Europe sending extreme volumes, which alone is impacting NRR by a 3 percentage point drop, which was extraordinary campaign activity for this client.

Great. We can move on to the next one. You say that high single-digit gross profit growth equals 105% net retention rate. This had historically been 110%. What is the change?

When we say 105%, we're basically assuming a fairly stable revenue mix. Also between Enterprise and Global Messaging, we had periods of 110% and above for some quarters, and that was impacted by very high growth in the Global Messaging segment, where we now have sort of terminated traffic and closely monitoring both sort of margin levels and also bad debt exposure. So given a normalized revenue mix, the 105% will sort of support gross profit growth in the high single-digit range.

Great. And then a couple of more questions from Petter Kongslie. There is negative gross profit growth in South Africa in Q2. How does this compare to your expectations during due diligence? And how should we read this compared to guidance of high single digits?

I suspect, Petter, that you're referring to Slide 6 in the presentation where we have sort of tried to isolate out the nonconsolidated pro forma. How you should view this is that in Q2 2025, we have NOK 21 million, which -- of M&A effects consolidated into the P&L. So you need to add that on top of the NOK 85 million nonconsolidated pro forma. So that gives you around NOK 106 million in sort of -- which is comparable then to the NOK 91 million last year. So that gives you a growth of around 16%. So that's the growth momentum on the M&A part. I would say we're very pleased with the SMSPortal performance in Q2. It's growing nicely and according to expectations.

Great. And then CapEx around NOK 180 million, NOK 190 million this year, which is a significant increase compared to 2024. How should we view this in 2026?