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Like its peers, LINK Mobility showed strong results in Q2. Unlike its peers, however, it is the only CPaaS company to report double-digit improvements in both sequential and year-over-year revenue growth. Additionally, it expanded into Portugal via its EZ4U acquisition and has delivered 51 million RCS messages this year.
Disclaimer: This is not stock advice. Everything about the messaging business interests me, including asset pricing. Use your judgment to invest your money.
The Good
With 18% YoY (in USD) growth and 10% QoQ growth, expansion into the Portuguese market, and a market-leading 112% net retention, there was plenty of good news in the report. LINK Mobility also reported double-digit organic gross profit growth driven by small volumes, RCS, and WhatsApp. High profit from new contract wins included a 7% YoY growth in A2P traffic and 23% message volume growth. The message volume growth apparently comes without compromising on gross margins. This too is rare.
The Interesting
The majority of the growth was driven by core use cases, such as alerts, reminders, payment, and security. Demand for the 2FA product remains stable, which could indicate that the industry-wide AIT backlash has run its course.
The most aggressive growth is coming from mobile marketing use cases that require richer features like RCS and WhatsApp. In fact, LINK Mobility reported 51 million RCS messages in the first half of the year, marking a 322% increase from the same period in 2022.
The Unknown
LINK Mobility consistently releases a transparent earnings packet. It is the only company I watch that shares message volumes and its M&A valuation criteria. However, the one unknown is how RCS will affect its margins and products. Will it create new use cases? How much will RCS cannibalize existing SMS/MMS channels? How will it affect WhatsApp? On the M&A front, will it reignite its appetite for big acquisitions?
Finally
LINK Mobility remains the only company I watch that is on a stated, well-defined path to build an M&A pipeline. In this focus, it is special. However, everything I hear from the industry suggests that M&A activity remains a major issue—particularly the disconnect on asset pricing. More on that in a future post.