Sinch’s messaging and email APIs drove stronger growth in the Americas during the second quarter, but churn from a legacy verification product in Europe and operational issues in India limited gross-profit growth.
The cloud communications provider reported revenue of $708 million for the three months to June 30, an organic increase of six percent year on year.
Gross profit was $237 million, up two percent organically. Adjusted EBITDA was $88 million and free cash flow reached $77 million.
“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 strengths where it matters the most,” said Jonas Dahlberg, Sinch’s acting CEO and CFO.
“We accelerated organic revenue growth to six percent, driven by Americas and the API product category."
Net leverage improved to 1.9 times EBITDA, from 2.0 times at the end of the first quarter.
Americas API Growth Drives The Quarter
The Americas, which accounts for around two-thirds of Sinch’s gross profit, delivered nine percent organic revenue growth and 10 percent organic gross-profit growth.
Sinch said its API platform was the main contributor, with messaging and email producing mid-teens organic revenue growth. Lower network-voice transmission costs in the US also supported profitability as the company moves from TDM to IP-based technology.
“Americas is the largest region, growing close to double digit,” Dahlberg said. “It is proving the strength of the market, and it proves our position in this important market.”
Email was a particular focus of the presentation. Dahlberg said the business has delivered double-digit revenue and gross-profit growth for several years, despite unit-price compression in the volume-led market.
Sinch delivers around 1.6 million emails per minute, or roughly 850 billion annually, according to the company. It expects to pass one trillion annual emails as volumes continue to rise.
The company is also putting more emphasis on cross-selling. Half of Sinch’s ten largest new deals in the quarter involved existing customers buying additional products, such as email or voice services alongside messaging.
Verification Churn Pressures Europe
Europe showed early signs of stabilisation after three consecutive quarters of revenue decline. However, gross profit in the region fell four percent organically.
