Sinch has had a big year, from key strategic acquisitions that have progressed its global footprint and added new capabilities to the Sinch product set, to a major rebrand that has unified all of the CLX businesses under a single identity.
Going forward the future is bright for Sinch. Here our president and CEO, Oscar Werner, talks through the Sinch strategy as the company gears up for more growth and innovation in the year ahead.
How is the mobile services market shaping up?
What strikes me about our market is the tremendous market size and high consumer uptake. Our products have the same penetration as mobile phones, which implies 100 percent of all consumers in the developed world.
“I have yet to meet a single person who has never used the kind of services we enable - calling a taxi from an app, receiving an appointment reminder through text message, or perhaps talking to a doctor through a live video call”
What is driving the market forward?
High usage among individuals also means we can address a very large amount of businesses. Our platform can offer real business value to nearly every company in the world, from the hairdresser on your street corner to tech companies with operations in hundreds of countries.
Instant and intimate, the mobile phone offers a direct channel that cuts through the noise and enables valuable interaction. Usage among businesses is now moving from early adopters to early majority, with increasing volumes across the globe.
“Instant and intimate, the mobile phone offers a direct channel that cuts through the noise and enables valuable interaction.”
How does Sinch approach the market? What is the business model?
Many businesses work with us directly, particularly for demanding use cases, and others rely on our channel partners who help integrate our APIs with customers’ systems or build our products into other cloud-based platforms like online CRM or logistics systems.
We are particularly competitive in demanding situations where an enterprise looks for high-quality delivery, at low latency, to multiple countries, with volumes in the billions. Direct connections to hundreds of mobile operators means that we can offer higher quality and competitive pricing, without unnecessary middlemen who impede service quality and jeopardize the integrity of sensitive customer communications.
Through our Operator division, which sells software to mobile operators, we have a much deeper understanding of the telecoms tech stack than our competitors in the ‘Communications-Platform-as-a-Service’ (CPaaS) space.
How has the Sinch team enabled growth?
What has also struck me is the dedication and talent of my colleagues. Growing a business at our pace requires hard work and cooperation between functions throughout our company. I continue to be amazed not just with the outcomes we achieve, but by the positive spirit and helpful attitude that is core to our company’s culture.
This is a great foundation for the new Sinch, our new shared brand for all business units that we launched in early 2019.
Can you run us through some of the growth numbers?
We grow both organically and through acquisitions. Since a large part of our revenues is passed on as fees to mobile operators, we focus primarily on gross profit and EBITDA. In 2018, total gross profit grew by 29 percent compared to 2017 and Adj EBITDA increased by 24 percent.
Our Enterprise division, which houses most of our messaging business, saw gross profit rise by 30 percent in 2018 compared to 2017. Around 7 percentage points of this increase came from Unwire, a successful bolt-on acquisition in Denmark that closed in March 2018.
Sinch Voice and Video reported 39 percent higher gross profit in 2018 than in 2017, with accelerating growth and a welcome transition into positive EBITDA in the fourth quarter. Unusually strong performance in 2017 burdened growth in our Operator division in 2018, but the end of the year saw improved performance with better conversion of orders to revenues. Vehicle, an acquisition we closed in April 2018, has developed even better than anticipated and positions us as an innovation leader in personalized video messaging.
What is the Sinch strategy for acquisitions?
We have an active M&A agenda and targets fall into two broad categories. We can acquire scale and profit, adding businesses where we can move acquired messaging traffic onto our own platform, win synergies, and upsell our full product portfolio to our new customers.
We can also add complementary technology, adding capabilities that helps fuel our growth and strengthen our position as a global leader in messaging and CPaaS.
What does the future hold for Sinch?
Looking ahead, technology evolution creates new opportunities to add value and grow our business. We see a future where businesses use multiple channels, rich imagery and video, and where notifications turn into conversations.
“We see a future where businesses use multiple channels, rich imagery and video, and where notifications turn into conversations.”
Rich conversational messaging lets businesses provide an app-like experience, direct to the inbox, without the need for consumers to download a specific app. It provides a more efficient way to handle tasks currently handled by call centers, and can significantly expand our addressable market.
This builds on the unrivalled reach and direct utility of text messaging, a cornerstone of our offer that is poised for continued growth.
In 2019, we will be particularly active in RCS, an upgrade to SMS that vastly improves customer experience and business messaging capabilities of the default messaging app on a range of supported handsets. We are adding support for more third-party chat apps and we are building more tools for businesses to leverage these new capabilities and engage with their customers in richer, more meaningful ways.