Earnings call transcript: Link Mobility's Q2 2025 sees growth in EBITDA

Link Mobility reported mixed Q2 2025 results, with adjusted EBITDA rising 18% to 212 million NOK and margin expanding 2.2 percentage points, despite a 3% revenue decline year-on-year (11% organic). The company is strategically shifting towards higher-margin CPaaS and RCS solutions, exemplified by record contract wins and the acquisition of South Africa's SMS Portal at an attractive 4.6x cash EBITDA upfront. While InvestingPro notes a 'WEAK' financial health score, Link Mobility maintains strong liquidity and guides for high single-digit organic gross profit growth, expecting EBITDA growth to outpace gross profit, underpinned by continued accretive M&A.

Analysis

Link Mobility's Q2 2025 results present a clear strategic pivot, where topline contraction is being exchanged for enhanced profitability and a higher-quality revenue mix. While reported revenue declined 3% year-on-year (11% on an organic basis), this was overshadowed by an 18% increase in adjusted EBITDA to 212 million NOK and a 2.2 percentage point expansion in the adjusted EBITDA margin to 12.1%. This margin improvement is a direct result of the company's shift away from low-margin A2P SMS traffic towards higher-value CPaaS and RCS solutions, which is further validated by record contract wins where CPaaS deals surpassed A2P for the first time. Management attributes the revenue decline to temporary headwinds, including reduced spend from a handful of large enterprise clients and tough comparables, which are expected to diminish by year-end. The acquisition of SMS Portal in South Africa at an attractive multiple of 4.6x cash EBITDA is a significant strategic move, expanding the company's global footprint and immediately improving pro forma EBITDA and margins. Despite an InvestingPro Financial Health Score of 1.59 labeled as 'WEAK', the company maintains a strong liquidity position with a current ratio of 4.52 and projects post-acquisition leverage at a manageable 1.7x, well within its stated policy, signaling sufficient capacity for its active M&A strategy.

Key Decisions for Investors

• Investors should prioritize monitoring the trajectory of organic gross profit growth over headline revenue, as the company's strategy is explicitly focused on margin expansion through a shift to higher-value CPaaS and RCS solutions.
• The successful integration of the accretive SMS Portal acquisition is a key near-term catalyst to watch, as it is expected to significantly enhance pro forma EBITDA and cash generation, validating the company's M&A-driven growth model.
• Consider the upcoming rollout of RCS for iOS in the Nordics, anticipated for Q1 2026, as a significant medium-term growth driver that could accelerate the transition to higher-margin services in a core market.
• While the company's profitability and strategic execution are improving, the 'WEAK' financial health score and the stock trading slightly above its fair value suggest a cautious approach may be warranted until the temporary revenue headwinds are confirmed to have subsided in the upcoming quarters.