Link Mobility Group Holding ASA

OSE:LINK

Earnings Call Transcript 2021-Q4

[Tom Rogn, Vice President Investor Relations]

Good morning, and welcome to the fourth quarter results presentation for Link Mobility. I'm Tom Rogn, Head of Investor Relations, and I'm joined by Guillaume Van Gaver, CEO; and Thomas Berge, CFO, who will present the results. Following the presentation there will be Q&A session. Please see volume details in the stock exchange release. It is also possible to post questions during the presentation at Q&A. Guillaume?

[Guillaume Alain-Robert Van Gaver]

Thank you, Tom. Good morning. Thank you for joining this fourth quarter internal report. Let's start with tax and figures regarding LINK at the high level. As you know, we've been funded 21 years ago. We hold the #1 enterprise position when it comes to messaging in Europe. And in 2021, we're very happy to have transmitted through our platforms more than 14 billion messages. We are present in 19 countries, and we have more than 47,000 customers. If you take into account our acquired entities in 2021, our last 12-month revenues have reached NOK 4.6 billion and our adjusted EBITDA, NOK 619 million. Looking over the last 4 years, it's great to see that we've been able to grow our top line by 33%, and we have done also very well when it comes to our adjusted EBITDA by more than 43%.But let's look at the fourth quarter in more detail. When looking at the fourth quarter, we are happy to report a 25% growth in our fourth quarter revenues, reaching close to NOK 1.3 billion, and that is 16% on an organic basis in fixed currency, really supported by strong contribution from global messaging. Also, our gross profit reached all-time high at EUR 360 million, which is a 37% increase as compared to Q4 2020. This gross margin expansion is explained also by the acquisition of Message Broadcast in the U.S.On a pure organic basis, our gross profit grew in fixed currency by 11%.Looking at the adjusted EBITDA, we have also reached an all-time high at NOK 176 million, which is a 47% increase quarter 2021 versus quarter 2020. It's great to see that our adjusted EBITDA margin is now at 13.6% as compared to 11.5%, and that actually our organic adjusted EBITDA has increased by 15% in fixed currency.Two other important elements when entering into 2022. We have signed 668 contracts and agreements, either with new customers or expanding business with existing customers. And very recently, we've been awarded the Best RCS Provider, which is a great help in pursuing our growth in the CPaaS space. But that's also reflect on 2021 as it is 1 year since our October 2020 IPO. On the revenue, as you see, we have been growing by 25% also for the year with NOK 4.5 billion on a reported basis. When you look at pro forma numbers, again, we've reached NOK 4.6 billion. This is a revenue growth on a pro forma basis in fixed currency of 16%. Our adjusted EBITDA grew by 42% to NOK 557 million, on a pro forma basis, as I said, NOK 619 million. This means that our pro forma adjusted EBITDA grew in fixed currency by 8% in 2021.Also reflecting all the great work that has been done by the LINK Mobility team, we've been recognized an established leader in the CPaaS industry, meaning that LINK Mobility is well underway of transforming itself from an A2P player to a CPaaS player, and we are now already an established leader in that category, which is great.At the end of 2021, we have a higher leverage than our financial policy of 3.5x. Indeed, the acquisition of Message Broadcast but to not also being able to complete Soprano put us in that situation where our leverage is higher than our financial policy. Nevertheless, the significant growth we have from our operations and the cash flow generation would put us at the end of 2022 very close to that financial policy of ours.When looking also at 2021, it's fair to say that we have adjusted our midterm revenue growth guideline from 20% to 14% and 17% because we had to take into account the impact of the lockdowns in society in 2020 and 2021; the slow rollout of our go-to-market strategy, which is very ambitious still; and last but not least, the small incremental contribution still of the CPaaS projects within our product portfolio. Great momentum, but the S-curve is also taking into effect that this will reflect on a 14% to 17% growth rate in the midterm.Also, we would like to highlight in our report in the following pages that the revenues in Message Broadcast for the second half of 2021 was slightly down as compared to the previous trends due to lower critical events revenues, but we will cover that in a few slides.So beyond 2021, let's look at 2022 and the midterm. into 2022, we are confident to deliver already on the 14% to 17% revenue growth for 2022. But please expect some variances on a quarter-by-quarter basis because we still have the 2021 lockdown effect. And when you look at the 2022 numbers, this will also reflect in our KPIs. If you focus on the enterprise market, we are guiding for the entire 2022 for at least a 110% net retention rates, reflecting the low churn of our industry and especially at LINK Mobility. We are also expecting gross profit to actually trend up in the second half of 2022 as we see the full effect of the acquisition of Message Broadcast.Yet again, LINK Mobility has one of its strategy based on M&A. And you will see M&A conversations being translated into agreements, hopefully, with 2 important elements in mind is that we are looking at M&A with an accretive to our own valuation approach and also that it has at least a neutral to a positive leverage impact in LINK Mobility. As said, we are looking at a significant deleveraging aspects for LINK Mobility in 2022, bringing us much closer to our financial policy of 3.5x. When you look at 2024, going forward, we maintained our midterm guidance for the end of 2024 on a pro forma basis for revenue above NOK 10 billion. We also see that in the most advanced customer segments, most advanced countries, the adoption of CPaaS will bring us closer to the 20% growth rate. And from a profitability standpoint, we're aiming to deliver 15% to 17%, highlighting the high scalable effect of our business model. That is for our forward-looking statements. But now let's look at some key elements of the Q4 results.Starting with the U.S. We expect in 2022 a strong performance on Message Broadcast. As you know, Message Broadcast is very well equipped to actually serve the utility segment in the U.S. The utility segment relies on products from Message Broadcast as they have strong obligations and commitments to deliver critical messages for their customers. If they do not do this, they will be exposed to fines and being noncompliant. So we've developed really bespoke solution for the utility segments.And within Message Broadcast, we have 2 types of revenues: the licensing profile services called Messaging Solutions and also the Critical Events. In the second half and especially in the fourth quarter of 2021, there has been abnormal low Critical Events coming from the fact that in the West Coast, because we have had very wet temperature and you can see the humidity charts on the right side of this chart, highlighting that it was a very exceptional weather conditions and also exceptionally low wind from the Gulf of Mexico. This has resulted for Message Broadcast in much lower critical event revenues in the fourth quarter of 2021.But looking deep inside Message Broadcast, we remain extremely confident in the years to come because we are registered in very significant positive momentum on the messaging solutions of our business.Just on quarter 4, 2021 as compared to quarter 4, 2020, we've seen a 37% growth in revenues from messaging solutions.And if you look at next slide, we are also signing new customers. This is an example of a new sign in the quarter 4, 2021, with a customer of more than 3 million in the U.S., a market capitalization of NOK 20 billion, and this new sign will translate automatically a new license and professional fees revenues. They have chosen LINK Mobility and Message Broadcast for the fact that we bring SMS, voice and e-mail solutions really tailored for the utility segments. Also, we are expanding in the U.S. from a geographic standpoint, for instance, Eversource is located in the northeast of the U.S., where typically, historically, Message Broadcast was very much more in California or the western side of the U.S. So that brings a more diverse graphic footprint. So we are entering 2022 with a lot of tailwind from Message Broadcast.So we're going to leverage our great win recently in the recent weeks, we've been awarded the Best RCS Provider worldwide, and Juniper has recognized us as a Platinum winner for RCS solutions. We've explained to you several times that we see 2021 as the first year of RCS, where it is getting scale and momentum. And LINK Mobility has been recognized not only for our great API with the ability to connect to more than 80 operators on RCS worldwide, but also to our solutions which enables brands and companies to actually tailor marketing communication and also conversations.And when you look at RCS, which is really the second generation of SMS, it has much higher conversion rates, it has much higher engagement rates and get through rates, meaning that it brings a lot of value and for LINK Mobility the profit per message is up to 50% more than what it is on traditional media. So this is a great win, and the teams are really busy on leveraging this great news in our customer base. And it's great to see that actually customers are calling us on the back of this award.Looking at LINK Mobility, we are really driving an ambitious run map from a product standpoint, where CPaaS is evolving every year with more advanced conversational omnichannel solutions, not only on the foundation layer with the foundations such as security, compliance, but also for orchestration of channels. And you see that we are planning to implement new channels such as SIP trunking at our network layer, video. But we are also leveraging all of the nice software that has been built, recently chatbots, analytics and customer data platform. And we'll come back to that because the recent solution acquisitions are contributing to LINK Mobility strength in the CPaaS offering. So we're very equipped to actually leverage the products and the service and the platform that we have developed to capture the growth of CPaaS going forward.And that has been recognized in our customer numbers. We've reached more than 47,000 customers, not only from acquired growth with 3,800 customers, but also from organic growth. And it's great to see the momentum we have in the marketplace on winning new customers and new use cases.Let's look at some of the most recent wins actually, not only in terms of numbers, but highlighting some of the key wins. And I'm happy to quote this win from the U.K., Specsavers. It's a company based in the U.K. They're leader in spectacles. They've chosen LINK Mobility, not only because we are able to serve them in a lot of other European countries, you have the list in front of you, Norway, Ireland, Spain, Netherlands, Denmark, Finland, Sweden. But also because we are able to provide them an omnichannel solution with Rich SMS, RCS SMS, for engaging their customers for appointment confirmation. But also, LINK Mobility was in a position to actually offer not only for their marketing team connected to Adobe Campaign Management, but also for each of the 900 stores an ability for the local stores to engage with their customer base using LINK Mobility platforms. So that's a great win on the LINK Mobility side.Also going into 2022, we made a lot of investments in the health vertical. Historically, we were extremely good at providing appointment reminders, appointment booking solutions which have been very helpful and handy. Recently, we have been using those services a lot in Norway, Poland, Austria, in the U.K. and also in the U.S. And more recently, we are introducing new features such as AI, chatbots, conversation solutions, payment solutions.If I just take the example in the U.S., we are using Message Broadcast and LINK Mobility technology to actually renew subscriptions to different customers for Amgen, for instance, and McKesson. So clearly, health has been an area of focus for us and to help a lot of companies also, and we will leverage all of those investments going into 2022.If you stand back and you look at what has been achieved, you can see that there is inherent growth in CPaaS in a lot of the countries where LINK Mobility operates. Not only growth in the most mature markets such as the Nordics, the U.K., but also growth coming in the countries where the adoption historically has been lower. And not only those countries are catching up, but they also are going to leverage more of the new channels, such as OTT, WhatsApp and RCS, which will create a breakthrough for them in terms of value of those services going forward.Last but not least, I think it will be fair to highlight that on 2021, for the first time, LINK Mobility not only acquired geographic footprint with acquisition of A2P players, but also solution companies. We've acquired 3 solutions companies that directly contributes to the LINK Mobility product offering and cross-sell and upsell: Tismi, for voice and number masking; MarketingPlatform, for customer data platform management and e-mail; and Xenioo for chatbot and omnichannel communication. Already, the Tismi products are being expanding in countries like Austria and France. MarketingPlatform solutions are actually rolled out aggressively in the Nordics. And we have already a lot of opportunities on Xenioo in Europe but also in the U.S. So with this positive news, I would like to hand over to Thomas for the financial section.

[Thomas Berge, Chief Financial Officer]

Thank you, Gill. Starting with reported revenue. LINK reports all-time high quarterly revenue of almost NOK 1.3 billion, a 25% growth, including M&A and a 16% organic growth in local currency. Revenue from acquired entities amounted to NOK 152 million. The 2 latest acquisition, Xenioo and Altiria, are going to be included in the P&L from January 2022. Messaging volumes grew 31%, somewhat higher than revenue growth of 25%. That is mainly due to the dilution effect of the higher portion of revenue coming from low price, low margin global messaging segment.LINK has closed 7 acquisitions in the last 12 months. As an addition to the reported P&L, pro forma figures will be presented to give a better overview of the current size and state of the company. Pro forma figures include historical financials of acquired entities also before closing date. Pro forma revenue growth for all entities, including and excluding the U.S. is presented in the graphs at the left, so relative performance in the U.S. and Europe can be assessed.Total revenue growth, excluding the U.S., is reported at 16% and 11% revenue growth for the Enterprise segment. Higher revenue growth from global messaging increased total revenue on top of the growth from the Enterprise segment. Within the Enterprise segment, the regions displayed varying pro forma growth rates. The Nordics reports high growth rate of 17% in fixed currency with strong performance in the retail sector, public sector and good momentum in the inflow of new clients.In Central Europe, the growth rate was 9% in fixed currency, lower than growth levels observed in previous quarters. Q4 2020 for Central Europe experienced high volumes and thereby creating tougher comparables for the current quarter as logistics and e-commerce sector had high activity due to the lockdowns of the retail sector last year. Logistics and e-commerce constitute a larger part of this region's P&L compared to the other regions.Moving over to Western Europe, the growth rate was 6% in fixed currency, subdued by low marketing activity in the retail sector in France as we also reported last quarter. Many French retail chains have made significant cuts in marketing spend to adapt to a tough 2021, with uncertainty and economic hardship caused by government lockdown on retail stores. As we stated on the slide, the sum of the effects mentioned for Central and Western Europe lowered the Enterprise revenue growth by around 2 to 3 percentage points for the fourth quarter.Message Broadcast in the U.S. experienced abnormal low critical event volumes in the fourth quarter, thereby negatively impacting growth rates. Pro forma revenue growth including the U.S. is 15% for total revenue and 9% for the Enterprise segment.Next slide goes more deeply into Message Broadcast and its revenue streams. Message Broadcast has a business model with 2 separate revenue streams, one being stable revenue from messaging solutions like transactions, licenses and professional services, more comparable to revenue streams in the European markets. The second revenue category is critical event messaging derived from the utility vertical. Critical event messaging are more volatile volumes being triggered by bad weather, which causes problems with maintaining the electricity grid in the affected regions. This again triggers a regulatory obligation for the utility companies to communicate and inform their end users. One critical event can result in over USD 1 million in revenue per day due to the dimensions of our utility clients with millions of end users.The graph on the top show revenue development on LTM basis since Q1 2020, split on messaging solutions and critical event messaging. The graph at the bottom displays quarterly revenue for the same categories. The pattern is clear. There is a steady underlying revenue growth deriving from messaging solution with a full year 2021 revenue growth of 17% and 38% growth in Q4 compared to same quarter last year. The growth from messaging solutions in H2 were counteracted by a revenue decline for critical event messaging, resulting in lower total revenue for both second half of 2021 and for the fourth quarter.In H2 2021, abnormal weather reduced critical event revenue significantly compared to a normal year by 2020. Critical events revenue in H2 2021 was $2.3 million compared to $5.7 million for the same period last year. Peak season for critical events are in H2 mainly connected to seasonal hurricanes in the Southeast and drought in Western U.S. In the Southeast, only 1 hurricane hit land in 2021, which resulted in low critical event volumes compared to a more normal hurricane year with several hitting land.In Western U.S., drought and high winds in the second half of the year normally require utility companies to close down their electricity grid to prevent starting wildfires. These events typically take place multiple times in several regions during H2. As Gill mentioned, Western U.S. experienced more in the normal in H2, which ended the droughts and eliminated the need to close electricity grids and thereby critical events messaging.Message Broadcast is currently rolling out their critical event product portfolio to other regions in the U.S. The signing of 2 major utility clients in the Northeast is expected to further scale revenue in 2022. And the company had 0 churn in 2021. An all-time high gross profit of NOK 360 million or a growth of 37%. Organic gross profit growth is reported at 11% in local currency, lower than the 16% organic revenue growth due to lower profitability impact from the low-margin Global Messaging segment.Enterprise margins remained stable year-over-year with an increase of 0.1 percentage points, while Global Messaging reduced total gross profit margin with minus 1.3 percentage points, as displayed on the graph at the bottom. Also, all-time high adjusted EBITDA at NOK 176 million, organic growth in fixed currency at 15% and a total growth of 47% when including the effect from the acquired entities. Stable EBITDA margins at 13.6%, equal to the margin in the third quarter. LINK reported an uplift in EBITDA margins from the third quarter due to the acquisition of Message Broadcast.Current run rate LTM numbers for revenue, including all entities indicate the yearly revenue over NOK 4.6 billion and gross profit of over NOK 1.3 billion. Gross profit margin at a healthy and stable 29%. Adjusted EBITDA at NOK 619 million for the full year of 2021. Comparing pro forma numbers for 2021 with 2020 in fixed currency outlines both the underlying run rate growth and the negative FX impact year-over-year. In fixed currency, pro forma revenue increased with 16% from 2020 to 2021, and adjusted EBITDA increased with NOK 49 million. The negative currency effect on pro forma adjusted EBITDA for 2021 was NOK 37 million compared to 2020 FX rates. To better convey the underlying growth in the pro forma numbers, the next slide shows both pro forma figures in reported currency and fixed currency. The graph at the top show LTM pro forma gross profit and adjusted EBITDA in fixed currency. Gross profit and adjusted EBITDA increased with 9% and 8%, respectively, despite the negative impact in H2 from the U.S., which reported NOK 18 million in lower gross profit in H2 2021 compared to the same period in 2020. LTM gross profit and adjusted EBITDA, excluding the U.S., grew by 11% and 14%, respectively, in fixed currency. The graph at the bottom shows the same numbers in reported currency. And as you can see, there is a considerable FX effect, especially in the second half of the year.We have been through the P&L down to adjusted EBITDA. Nonrecurring costs consist of M&A costs and share option costs, cost items not related to the underlying operations of the company. M&A costs consist mostly of external advisory costs. Only 2 employees working exclusively with M&A is included in the cost item. No other internal costs are reported or allocated under M&A costs. The reported share option costs are the accounted treatment of a future dilution effect with limited cash outlay. Cash outlay connected to social security tax, which was NOK 5.8 million in the fiscal year of 2021. For the fourth quarter, share option costs are reported at NOK 25 million, down from NOK 40 million in the third quarter as the first tranche of the RSUs have been distributed. The company expects share option costs to be stable at this level until the fourth quarter of 2022 when the allocation of the second tranche is expected to bring down the cost to around NOK 12 billion to NOK 14 million per quarter, of course, pending share price development.M&A-related costs are reported at NOK 20 million, and restructuring costs are reported at NOK 10 million. Restructuring costs are related to integration of acquired assets and mostly connected to personnel changes. Cost of depreciation reported at NOK 100 million, whereof NOK 75 million relates to the depreciation of assets deriving from purchase price allocations from acquired companies, with no future replacement CapEx, of course. Net finance items positive at NOK 96 million, impacted by net currency gain of NOK 127 million, which relates to U.S. dollar exposure not included in the hedge accounting as well as currency adjustments in euros above the maximum possible hedged amount according to hedge accounting principles.The balance sheet is at NOK 10.5 billion with an equity ratio of 48%. LINK has significant cash reserves of NOK 844 million, which is more than NOK 500 million above the NOK 250 million to NOK 300 million level needed for operational purposes. Receivables increased by NOK 156 million, payables increased by NOK 135 million, both due to the inclusion of acquired assets. Net interest-bearing debt at NOK 2,981 million, which increased in the second quarter of 2021 due to partly funding of the acquisition of Message Broadcast through a tap issue of the existing bond agreement. Last slide for me is cash flow. Net cash flow from operating activities includes nonrecurring costs for M&A and is reported at NOK 351 million for 2021, a ratio of 63% compared to adjusted EBITDA. Comparing the same operating cash flow over reported EBITDA, which contains no recurring costs, results in a ratio of 115%. Operating cash flow is significantly higher than reported EBITDA as a large portion of nonrecurring costs and no cash outlay.Cash flow from operations, excluding nonrecurring costs for M&A, is NOK 453 million or a ratio of 81% compared to adjusted EBITDA. LINK experienced high cash generation in 2021, producing excess cash also after CapEx and interest costs. In the net free cash flow, after deducting CapEx of NOK 104 million and interest costs at NOK 110 million, the company generated excess cash in 2021 of over NOK 200 million. The full year effect of the acquisitions closed in 2021 will further increase cash generation in 2022 as a whole year of EBITDA will be included in the P&L., and by far, outweigh the full year increases in CapEx and interest costs connected to the acquired entities. After closing the transaction with Message Broadcast, leverage is temporarily higher than LINK's financial policy. The financial policy is unchanged, and the company has as a top priority to push the leverage below 3.5x through cash generation, organic growth and potential accretive M&A. The company expects a significant deleveraging effect from organic growth at the end of 2022, bringing leverage much closer to the financial policy.That was it for me. Over to Tom and Q&A.

[Tom Rogn, Vice President Investor Relations]

Thank you, Thomas. We are then ready to start the Q&A session. [Operator Instructions] Operator, can you please help us with the Q&A.

[Operator]

[Operator Instructions] The first question is from the line of Sanja -- Savinovic from Carnegie.

[Predrag Savinovic, Research Analyst]

This is Predrag from Carnegie. First one is on the revenue guidance. If you could discuss a little bit to what extent do you see this be driven by existing customers or the NRR and to what extent from new accounts?

[Guillaume Alain-Robert Van Gaver]

Thank you, Predrag, for the question. So we see the 14% to 17% revenue outlook for 2022 to be driven a lot from existing customers. We see again a lot of ability to grow current usage of our services within our customer base, but we're also very happy to enter 2022 with good momentum in our customer signed opportunities in Q4, and we've signed more than 668 opportunities in the fourth quarter, which is a very good level. And we see that this will also contribute to additional revenue streams on top of existing customers.

[Predrag Savinovic, Research Analyst]

Great. And then on tariff fees, this has been a topic very much for all CPaaS players. And we had Twilio reporting also yesterday, there was some gross margin pressure there from them. Can you reason a little bit on this? And maybe reiterate what you've said historically? And if there's a lag effect there to boost your progression, say, on organic gross profit generation for the coming quarters? How should we think about this?

[Guillaume Alain-Robert Van Gaver]

Predrag, as we mentioned in the last quarter, we have all of our agreements, which enables us to pass on to our customers any increase from mobile operators. So we have some hedging on any price increase from operators. So even if they are late or delayed increase in the pipeline, we would be able to pass it on to our customers. And that's the fact of us being very much enterprise-focused.The second element is that we are also, of course, working hard in consolidating our volumes in countries like Italy for instance, in Spain, but also in other countries where, by combining our acquisitions, we have stronger volumes and we are in a position to actually negotiate discounts, which are directly impacting positively our gross margins.

[Predrag Savinovic, Research Analyst]

All right. And on the cash flow, it's quite strong in the quarter. To what extent is this representative for the coming quarters? And then I guess your comments kind of hint that you should see the strongest cash flow progression for 2022 towards the latter part. Is that correct? Is that a correct assessment?

[Thomas Berge, Chief Financial Officer]

Working capital is fairly stable over time, but it can fluctuate between different quarters, Predrag. Our COGS, they are concentrated on a few larger mobile operators, and any delays in invoicing or such from their side will impact working capital. I think the cash flow that you see now for the full year 2021 is sort of like the best run rate viewed going forward too.

[Operator]

[Operator Instructions] We have a follow-up question from Savinovic from Carnegie.

[Predrag Savinovic, Research Analyst]

All right. One final one from my side on the churn level. Guillaume, you reasoned a little bit on it's being generally low and generally low in the industry. But could we get a general update on what you see here and also what you would expect going forward?

[Guillaume Alain-Robert Van Gaver]

Thank you for the question regarding churn. We have low churn historically, and we believe this pattern would continue well into 2022. So we don't report churn specifically. As you know, we are reporting the net retention level. So we're very positive on our ability to keep our existing customers and grow their usage.

[Tom Rogn, Vice President Investor Relations]

As it doesn't seem that we have any other callers at the moment, we will start with some questions from some of you have been posted online. First question is from [Yesper Tsugumomo], and this regarding to the Message Broadcast messaging solutions business, which saw a very strong quarter-over-quarter 38% growth. What is the visibility and drivers for that going forward?

[Guillaume Alain-Robert Van Gaver]

Thank you for the question, Yesper. If we start with the first question, indeed, we're very happy about the momentum on messaging solutions, which consist of revenues from licensing and professional services, for instance. Over the last 12 months, we've seen a growth rate of 17%, a very strong growth rate in Q4. Going into 2022, we're very happy to have reported 2 big wins. And these wins will impact directly messaging solutions, licensing revenues. So we are entering in 2022 with very good momentum. And I can confirm to you again that we have not experienced any churn in Message Broadcast. And we derive also our revenue growth from expanding use cases with our existing customer base, expanding into marketing, customer service use cases, introducing new channels. So the growth from our customer base is strong.

[Tom Rogn, Vice President Investor Relations]

Yesper has 2 follow-up questions. One regarding the organic growth in customer accounts, if there are any split by region, and interest cost guiding for 2022.

[Guillaume Alain-Robert Van Gaver]

Yes, when you look at the growth in customer accounts, it's great to see actually a lot of -- kind of growth from our customers in the retail segment. Because they've been really negatively impacted during lockdowns in 2021. They've been using our services to reignite the marketing efforts in their customer base. We see also some improvements in industries like airlines, events, tourism, which is also growing our customer accounts. From a geographic standpoint, we see a lot of growth in Eastern Europe, for instance, and also in the Nordics. And we also expect in 2022 a better performance on the Western Europe side.

[Thomas Berge, Chief Financial Officer]

Regarding the question on interest cost, you can assume that the interest cost going forward will be comparable to what we see in the fourth quarter, depending on the euro currency rate to NOK, of course. But in that interval that we have reported for the fourth quarter, just for detail, there is around NOK 4 million in amortized costs, which has no cash effect, of course, because it's already been deducted from the bond issuance.

[Tom Rogn, Vice President Investor Relations]

Next question is from Mads Rosendal. He is mentioning the strong cash flow we saw and is asking about cash conversion going forward.

[Thomas Berge, Chief Financial Officer]

I can take that one Gill. We expect cash conversion going forward to look like what we see for the full year of 2021. As I said on Predrag's questions, it's natural that we will have variation in the working capital from quarter-to-quarter, but if we have a very good working capital quarter, then normally, it has a tendency to adjust in the quarter or 2 later on. And the same happens if working capital is negative. So looking at 2021 should be sort of the best pinpoint on the current run rate, on cash conversion and the ratio too.

[Tom Rogn, Vice President Investor Relations]

Mads has a follow-up regarding how the Q1 of this year will look considering the lockdowns versus saw last year.

[Guillaume Alain-Robert Van Gaver]

Yes. We gave kind of an outlook of 14% to 17% revenue growth in 2022. It's fair to say, as I also explained that there will be strong variances on a quarter-to-quarter basis. For instance, it's fair also to have in mind that Q1 2021 was negatively impacted by lockdowns. We had also a strong reopening of society in Q2. You also saw some of the unusual critical events and revenue streams in the second half of 2021 in the U.S. So all of this will have impact in the quarterly reporting. That's why we felt it was important to give you the framework of the entire 2022, but expect some changes on a quarter-to-quarter basis.

[Tom Rogn, Vice President Investor Relations]

Then we have a question from [Daniel Djurberg]. He's looking into the critical events messaging business in the U.S. and how we can be sure that we didn't lose market share in the last year.

[Guillaume Alain-Robert Van Gaver]

Yes. Actually, we have had 0 churn, absolutely 0 churn. So we have, on the contrary, grown our messaging solutions, which is the stable part of the business by 37% in Q4, 17% in the last 12 months. So there is strong momentum for us in our customer base. And on the contrary, I would say that message broadcast in -- especially the utility segment is gaining market share.

[Tom Rogn, Vice President Investor Relations]

There's a follow up from Daniel regarding RCS and being strong position within RCS, how do LINK market RCS to enterprise clients? And are there any risks in the pricing models from the various operators?

[Guillaume Alain-Robert Van Gaver]

Look on RCS, we observed a higher margin in general compared to SMS or Rich SMS, for instance, up to 30% to 50% higher. We can see that this has a very positive impact for us when it comes to selling more advanced solutions. RCS has a very good payback for our customers because it converts much better. The conversion rates can be 3x to 5x better, engagement with customer is stronger. Click-through rates are stronger, so it's a really appealing product for our customers. So we always seek to present RCS to the countries and to the customers in the countries where RCS is available. And it's an easy upsell to a large degree because we've built the API, number one. Number two, we also have all of the software in order to deal with the campaign and the conversations coming from RCS. So already, with the win and the Juniper award, we've received incoming interest from new customers that didn't know about LINK before. So that's also additional positive momentum. So we're very happy to have won this reward from Juniper a few weeks ago.

[Tom Rogn, Vice President Investor Relations]

Follow-up on up from Daniel is the strong Message Broadcast brand in the U.S. and how be considering selling further CPaaS products like RCS, chatbots through the Message Broadcast brand.

[Guillaume Alain-Robert Van Gaver]

Yes. We have actually already fully engaged with customers on some of the LINK Mobility products to leverage the Message Broadcast in the U.S. I just want to give you the example of the chatbots, which is brought by the acquisition of Xenioo. And these products have been presented to Message Broadcast customers, and we see very positive signs of adoption of those products to Message Broadcast in the U.S.

[Tom Rogn, Vice President Investor Relations]

Then a question from Peter Kongslie regarding LINK's adjustment on the P&L lines. And that some stakeholders are indicating that LINK should be valued on an EBITDA reported basis not on an adjusted basis. And how you can elaborate on the changes that LINK does through in the adjustments and if that is different from industry standards.

[Thomas Berge, Chief Financial Officer]

Yes, I can answer that one. LINK adjusts EBITDA to capture the performance of the underlying businesses by accumulating 3 cost categories under nonrecurring costs. These cost items include M&A-related costs, restructuring costs in connection with M&A and share option costs. M&A costs are almost exclusively external advisory costs. We only have 2 people working full time with M&A, which is included in this cost category. No other internal costs are reported or allocated under M&A cost. Restructuring costs reflect the integration of the acquired assets, and this cost category is mostly connected to personnel changes. Share option costs, as I said, are the accounting treatment of the future dilution effect with very little short-term cash effect associated with the social security tax, which was quantified for 2021 at NOK 5.8 million. As far as we can see, other listed players in the industry, they follow similar practices for adjustments. And we can see no reason similar adjustments for LINK should be deemed or viewed any differently compared to other listed entities.

[Tom Rogn, Vice President Investor Relations]

Another one from Peter regarding the Soprano transaction, which obviously didn't go through, but it was a high equity component. Is that something that LINK would consider for other transactions?

[Guillaume Alain-Robert Van Gaver]

Thank you, Peter, for the question. Look, we historically have used heavily the balance between equity and cash and deferred payments, typically 1/3, 1/3, 1/3. This is always our entering assumption for acquisitions. We have highlighted in this report that we are considering 2 factors also. Number one, we want to make sure that it is accretive from a valuation perspective linked to current LINK Mobility valuations. And second, when we do acquisition going forward, clearly, in 2022, especially, we're going to look at acquisitions which have either a neutral or positive impact when it comes to the leverage calculations.

[Tom Rogn, Vice President Investor Relations]

There is a follow-up on the share option cost from Peter regarding some color on the difference between the cost effect and the cash effect and how does this program is structured.

[Thomas Berge, Chief Financial Officer]

Yes, I can start maybe and then Guillaume can fill in. The options, there are going to be issued when they are earned and called upon. So there are going to be no cash effect connected to issuing the shares. It will be, as I said, previously also a dilution effect. And the only cash element here is social security tax that the company has to pay in certain geographies, depending on local rules. That's the only cash effect from it. And as I said, that's NOK 5.8 million for 2021.

[Tom Rogn, Vice President Investor Relations]

We have another question from [Charlie Brandon], on the revaluation of the industry effectively and then evaluation of targets and how that will imply or impact the acquisition strategy of LINK.

[Guillaume Alain-Robert Van Gaver]

As you know, we have always an active pipeline of acquisitions through the repricing of the CPaaS industry. Those discussions have been reset at lower valuation metrics. So clearly, this is not impacting directly our pipeline as it has been generally accepted by all stakeholders that we are in an environment with CPaaS companies repricing.

[Tom Rogn, Vice President Investor Relations]

As a follow-up from Charlie regarding the net retention rate and how the company can be confident to be above 110% for 2022 when the exit of 2021 was at 107% in Q4.

[Guillaume Alain-Robert Van Gaver]

I think this only refers to the enterprise net retention rate. We have a higher net retention rate when it comes to the total company. And again, we have strong momentum exiting Q4 2021. So therefore, we have the confidence that we can deliver on this 110% enterprise net retention rate for the year 2022.

[Tom Rogn, Vice President Investor Relations]

Next question comes from [indiscernible]. And the first question is regarding CapEx level and that you see in 2022.

[Thomas Berge, Chief Financial Officer]

I can answer that one. We expect CapEx for 2022 to be between NOK 160 million to NOK 180 million.

[Tom Rogn, Vice President Investor Relations]

4% Message Broadcast where we stated in the report that we have Message Broadcast has borne recently 2 large utility customers on the East Coast. Any color on the revenue potential for these new wins?

[Guillaume Alain-Robert Van Gaver]

We don't disclose the revenue potentials specifically, but what I would say, number one, is that the revenue potential is very much anchored into messaging solutions, including license revenues. These are 2 meaningful utility companies in terms of their own customer base and their market cap. So they are also in the U.S., so you can expect the size of those agreements to be significant and meaningful.

[Tom Rogn, Vice President Investor Relations]

So a follow-up on Message Broadcast from [indiscernible] and its regarding the mentioning of 0 churn for Message Broadcast. Is that related to critical events or for the whole business, including messaging solutions?

[Guillaume Alain-Robert Van Gaver]

The entire business of Message Broadcast did not experience any churn in 2021. And again, 2 new significant customers coming in Q4.

[Tom Rogn, Vice President Investor Relations]

There are question from Richard Broten, and he's -- LINK has previously been stating that considering a credit rating from like Moody's, S&P or Finch. Any comment on progress on this?

[Thomas Berge, Chief Financial Officer]

Yes, we have investigated it and discussed it with a couple of advisers and concluded that this is something which is very interesting for the company to do, but we need to add some more time as the bond has been set recently. It's only just over a year old, and the tenure is 5 years. So this is something which is more likely that the company will do in a year or 2 going forward.

[Tom Rogn, Vice President Investor Relations]

So we have a question from [Alvin Deng], and he's inquiring into the -- at the time of the acquisition of the Message Broadcast was indicated an EBITDA of about NOK 200 million. How was the actual result for that for 2021?

[Guillaume Alain-Robert Van Gaver]

Thomas?

[Thomas Berge, Chief Financial Officer]

Yes, we have not specified pro forma figures for Message Broadcast when it comes to 2021 itself. But you can assume that there is a fairly large gap there due to the shortfall on the critical events. As I said, we experienced only $2.3 million in revenue in H2 compared to a significantly higher amount, $5.7 million for the same period last year. And the profitability is close to 90% on their traffic. So that gives you a possibility to estimate the shortfall basically.

[Tom Rogn, Vice President Investor Relations]

At the moment, we have no further questions, please post any additional questions. As there are no additional questions, we would like to thank all participants and end the Q&A.