Annual Report 2020 Simplifying life by bringing all people and businesses together. Contents 4 About Sinch 46 Management report 64 Notes 5 Sinch as an investment 54 Multi-year review - Group 100 Certification and signatures 6 Sinch in brief 56 Consolidated income statement 101 Auditor's report 8 Message from the CEO 56 Consolidated statement of 105 Definitions of financial terms comprehensive income 10 The year in brief 106 Corporate governance statement 57 Consolidated statement of financial position 12 Market 112 Board of directors and executive management 58 Consolidated statement of changes in equity 16 Customers 116 Auditor’s report 59 Consolidated statement of cash flows 18 Strategy 117 Annual general meeting, definitions and 60 Parent company income statement acronyms, addresses 20 Acquisitions & integration 61 Parent company balance sheet 22 Financial model 62 Parent company statement of 24 Share changes in equity 26 Sustainability report 63 Parent company statement of cash flows Sinch Annual Report 2020 3 About Sinch Sinch develops digital tools that let businesses and people talk to each other. Powered by our cloud communications platform, enterprises can reach any mobile phone on the planet – within a second or two – via messaging, voice calls and video. Several of the biggest enterprises in the world are using Sinch’s advanced technology platform to communicate with their customers and Sinch is an established software supplier to mobile operators worldwide. Sinch has delivered profitable growth since it was founded in 2008. The Group is headquartered in Stockholm, Sweden, and has a presence in more than 40 other countries. The share is listed on Nasdaq Stockholm: XSTO: SINCH. Visit us at investors.sinch.com. SEK SEK 20 15 10 5 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2017 2018 2019 2020 4 Sinch Annual Report 2020 About Sinch Sinch as an investment Sinch is a leader in a growing, global market for Communications Platforms as a Service (CPaaS) Global leader in a and mobile customer engagement. We serve some growing market of the world’s most demanding enterprise custom- ers, including 8 out of the 10 largest US-based tech companies. Next-generation messaging is creating new opportunities for businesses to reach their custom- Next-generation ers with images, video, interactivity and artificial messaging intelligence/machine learning. The market Sinch addresses is growing dramatically due to techno- logical advances. Sinch has successfully executed and integrated sev- eral strategic acquisitions for scale and profitability and tech and go-to-market. Profitable businesses are acquired at accretive valuation where Sinch can Strategic acquisitions gain economies of scale and synergies, augment- ed by acquisitions of companies with complemen- tary tech and sales resources that advance Sinch’s organic growth. Four acquisitions were announced in 2020. Profitable from Sinch has been profitable since it was founded in day one 2008 and gross profit is more than ten times higher than at the IPO in 2015. SEK Adjusted EBITDA per share (SEK) SEK 20 15 10 5 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2017 2018 2019 2020 Sinch Annual Report 2020 5 About Sinch Sinch in brief 6 Sinch Annual Report 2020 About Sinch 43 countries • Australia Austria Belgium Brazil Canada China Colombia Costa Rica Czech Republic Denmark Ecuador Finland France Germany Greece Guatemala Hungary India Iraq Israel Italy Jordan Kenya Kuwait Malaysia Mexico Netherlands New Zealand Poland Russia Serbia Singapore South Africa South Korea Spain Sweden The Philippines Tunisia Turkey United Arab Emirates Ukraine United Kingdom United States 1,778 400+ employees at year-end 2020 direct connections to MNOs 43 132 billion countries with local presence interactions per year 100% 8 out of 10 Sinch reaches all mobile phones in the world the largest US-based tech companies are customers Sinch Annual Report 2020 7 CEO’s comment Establishing Sinch as a global leader We have set out make Sinch a global leader in mobile customer engagement. In 2020, we took several key steps to realize that vision with strong organic growth and strategic acquisitions in Asia and Latin America. Revenues for the full year surpassed SEK 8.0 billion, up 59 percent announced the acquisition of Wavy, a transaction that closed in from the the year before, and Gross Profit grew 57 percent to SEK 2021 that makes Sinch the regional leader in Latin America and 2.2 billion. Adjusted EBITDA was 59 percent higher than in 2019. strengthens our ability to deliver innovate Messaging solutions Underpinning these growth rates is an explicit strategy to add through WhatsApp. scale through both organic and acquired means. Acquisitions In November we closed the acquisition of SAP Digital Inter- contributed nearly half of the overall growth and our long-term connect, our then-largest acquisition, which further adds to our cooperation with several global, US-based tech companies con- scale and strengthens our market presence in the US, Europe and tributed significantly to our organic performance during the year. Asia. Integration work is now ongoing to migrate customers to our Scale is imperative also to profitability, and our larger size means global platform, deliver synergies and begin cross- and upsell of we can generate industry-leading profitability whilst investing our broadened, joint product portfolio. forcefully in new product development. Investments in Conversational Messaging Rapid Growth in Messaging Alongside SMS, many businesses are now finding success with Growth was particularly strong in Messaging, our largest seg- new messaging formats like WhatsApp, Viber, Messenger and ment, where Gross Profit increased by 68 percent compared to RCS. These channels support a broader feature set with pictures 2019. Sinch is particularly competitive when businesses look for and video, action buttons and read-receipts. Usage growth is global delivery, to customers in multiple countries, and when particularly strong in Brazil and India as customers recognise the quality is a key priority. We are directly connected to more than utility of interacting with businesses through the same messag- 400 mobile operators, which means that messages are delivered ing apps that they use to keep in touch with friends and family. faster, and with a higher success rate, since there are no unnec- The fundamental driver here is customer experience. With essary middlemen. Conversational Messaging, businesses engage with their SMS messaging continues to grow as businesses value its customers on a one-to-one basis, through their customers’ unrivalled open rates and 100% global reach. Every person with preferred messaging channels. This creates an app-like a mobile phone can receive SMS, and most people carry their experience, delivered to your inbox, in a format with minimal phones with them at all times. This makes SMS the best choice threshold to engage and respond. And you can pick up a con- for brief messages that break through the noise. versation with a business where you last left it, just like you would with a friend or family member. Expansion to India and Latin America We are now investing forcefully in the tools and capabili- ties that businesses need to deliver this experience. In 2020 we Expanding our presence in important local and regional markets launched the Sinch Conversation API, a product that lets a busi- helps expand our addressable market and strengthens our offer- nesses reach customers who use WhatsApp, RCS, SMS and more ing to global customers. With the acquisition of ACL Mobile, which through a single integration with Sinch. We also invested in AI closed in September, we have established Sinch as a leading and machine learning capabilities through the acquisition of provider of Messaging and CPaaS products in India, the world’s Chatlayer, a platform for multilingual chat- and voice bots that second largest mobile market. This is a fast-growing, mobile-first automatically understands and responds to customer questions. economy with a population exceeding 1.3 billion. In 2020 we also 8 Sinch Annual Report 2020 CEO’s comment Adding scale in Voice Safeguarding our employees Close cooperation with the world’s many mobile operators is during Covid-19 critical to ensure high-quality international connectivity. In 2020 We will look back at 2020 as a pivotal year where we truly estab- we have expanded our cooperation with Ericsson, providing the lished Sinch as a global leader in mobile customer engagement technology that powers SMS messaging in 5G networks. And and CPaaS. We will also remember the year for the challenges despite commercial headwinds triggered by the Covid-19 pan- brought on by the global Covid-19 pandemic. I want to take this demic, we have continued to invest in our Voice & Video offering. opportunity to thank all Sinch colleagues for the hard work and A great customer experience will make use of of multiple com- commitment in this unprecedented time. munications channels and the acquisition of Inteliquent – which we announced in February 2021 – will establish Sinch as a lead- Teamwork drives our success, today and tomorrow. ing CPaaS company also in voice. Oscar Werner CEO Sinch Annual Report 2020 9 About Sinch The year in brief Financial targets +59% +57% and outcomes growth in net sales over 2019 growth in gross profit over 2019 20 percent annual growth in adjusted EBITDA per share Adjusted EBITDA per share grew by 43 percent in 2020 Net debt of <2.5x adjusted 42% +59% EBITDA over time of gross profit translated into growth in EBITDA over 2019 Net debt/adjusted EBITDA adjusted EBITDA was –2.2x at year-end Market • Sinch was selected by Ericsson on 5 March to contribute mes- world and was honored as the top A2P SMS Messaging Vendor in saging technology for their ongoing 5G rollout.