Q1 2025 Zenvia Inc Earnings Call

Good morning, and thank you for standing by welcome to <unk> Q1, 2025 earnings conference call today shy sure CFO and Investor Relations Officer, who will be a sneaker in both him and Mr. Cassio biopsy is envious founder and C U.

The available for the Q&A.

Please be advised that today's conference is being recorded and a replay will be available at the company's IR website, where you can also access todays presentation. At this time all participants are in listen only mode. After the prepared remarks, there will be a question and answer session for the Q&A session. We ask you to right now your question.

<unk> via the Q&A icon at the bottom of your screen. Your name will then be announced and we'll be able to ask your questions live at this point our request to activate your microphone will appear on your screen.

If you do not want to open your microphone live please write down no microphone at the end of our question in this case, our operator, we'd redo question allowed now I would like to welcome shy sure Sir the floor is yours.

Good morning, everyone.

Thank you for being with US here today to discuss <unk> first quarter 'twenty can affect results.

Sure CFO in Aero.

Let's start the snapshot of the Q1 'twenty five performance, where you can see all the main financial Kpis of the period.

As you can see in the first quarter, we recorded strong top line growth of 39%, reaching almost 300 million reais, mainly driven by CBS.

On the profitability side, we continue to experience margin pressure in the <unk> business and some temporary impact on the SaaS business as we ramp up our agenda customer cloud solution.

Therefore, our consolidated adjusted gross profit declined 21% to 74 million Reais from 94 million, whereas a year ago with gross margin decreasing 25%.

There were two main drivers behind this.

First on the shipper side.

So another quarter with higher <unk> mix due to strong volume growth with lower margins combined with an increase in SMS coil supplied by the carriers in January which is expected to be pass through prices throughout the year.

Second on the SaaS side, while adjusted gross profit remained stable year over year. The margins were impacted by the transition to zimbra customer cloud as were still ramping up the business I'll talk more about this later on.

This drop in adjusted gross profit was partially offset by a $7 5 million Reais decrease in G&A, which represented 8% of our revenues in the quarter property half of what it represented a year ago.

As a result normalized EBIT of $220 million raised in the quarter in line with our expectations and is expected to increase progressively over the course of the year.

It is important to highlight that we incurred approximately 8 million reais and one time severance costs were in Q1 related to the workforce reduction as announced on January 15.

Let's take a deeper look at these results.

In this slide you can see the breakdown of our revenues between SaaS and seamless.

The revenue increase in this quarter came mainly from <unk>, which remains very dynamic and volatile and went up 58%, making up 73% of our total revenues.

The <unk> revenue growth came mostly from certain customers that currently have tight margins.

We are confident that the strategy of acquiring clients a tighter margins will pay off in the middle and long term as we do not need additional G&A expenses to manage them.

In the SaaS business revenue was up 5% year over year, mainly driven by higher revenues from SMB customers and encouraging sign given that it is the target audience of zebra customer cloud.

The SaaS business represented 25% of our revenues in the quarter.

This higher mix of <unk> with low margins still impactful gross margins, let's move to the next slide to discuss our profitability.

This slide gives us a comprehensive view on how gross profit and margin performed in the quarter.

The first chart on the left shows the SaaS business.

Adjusted gross profit was flat year over year, it's 43 million rise in Q1 25.

Our adjusted gross margin from SaaS wind down two seven percentage points to 54%.

Even though SMB customers have higher margins than the average mix. We saw a decrease in the SaaS adjusted gross margins, primarily due to the transition to zimbra customer cloud as the business is still in its ramp up phase.

We expect to keep scaling over the next quarter and improve profitability.

It is worth noting here that revenues from Zimbra customer cloud solutions increased 15% year over year and are expected to increase even more as we ramp up the business.

In the middle of this slide we can see the <unk> performance. There was again impacted by the newly acquired <unk> clients with lower margins and increase from the carriers that I already mentioned.

As a result, our consolidated adjusted gross profit totaled 74 million Reais in Q1 with five with an adjusted gross margin of 75%.

Moving on let's now discuss our G&A.

Our G&A expenses this quarter were down 24% year over year, reaching 24 million reais already to be around 8 million reais in seven costs incurred in Q1 25 as I mentioned earlier in this presentation.

This brings G&A as a percentage of revenues to 8% down six seven percentage points from the 14, 7% reported in the same period of 2004.

This is due to the workforce reduction of approximately 15% and also in January that is expected to result in cost savings between 30, and 35 million rising 25 already factoring in the severance expense.

Moving onto the next slide another team the extent, we have been highlighting in our presentation for a couple of quarters now EBITDA minus Capex recorded a positive 10 million reais inflow in the quarter.

When you look year over year. This metric remain mostly stable and we also ended the quarter with a cash balance of 86 million.

We expect EBITDA to continue growing at a faster pace than our capex as it has been the case for the last few quarters.

Capex for 2500 remaining the same level of 24.

Moving onto the next slide to talk about our next steps are.

Although they've been very consistent for the last couple of quarters. It's always important to remind you what we've been doing that for the next steps.

As we embark on a new strategic cycle, we are focused on expanding in the customer cloud in Brazil, and Latin America.

We're focused on accelerating organic growth leveraging our scalable new platform partner ecosystem, while maintaining our commitment to deleveraging the company.

The rollout of the new strategic cycle announced in January is taking a toll on short term profitability, but we are steadily advancing efforts to boost our medium and long term performance.

At the same time, we are streamlining operations. Even further we are playing a key role not just in how we serve clients, but in how we operate internally is really efficiency and intelligence.

As we disclosed in January we will carefully evaluate opportunities to divest noncore assets. We believe we own assets that hold significant value in their segments and an opportunistic divestments will play a role and optimize our capital structure.

We are working hard for these actions to result in a more efficient company with exceptionally solid business metrics, enabling us to unlock value for our shareholders.

With this we conclude our prepared remarks, and we're ready to take your questions.

We will now begin the question and answer session. Once again for this Q&A session. We ask you to write down your questions via the Q&A icon at the bottom of your screen. Your name will then be announced and if you'd be able to ask your questions live at this point our request to activate your microphone.

Will appear on your screen, if you prefer not to open your microphone lives. Please write down new microphone at the end of your question and operator, we read your questions aloud.

Okay.

Let me take your first question here in the webcast.

Could you talk in some more of the reasons behind this <unk> growth in terms of SMS volume do you think there is an AI tailwind here with companies spending a lot more on campaigns now or is this a temporary short term trend.

So do you want to talk about the trends on the in the SMS and if there is anything related to this.

Yes sure. There is some seasonality in terms of offers from us volumes due to our marketing campaigns, because theyre relying on somehow says its main channel.

We understand that this is keeping a strong pace in the last couple of quarters.

You're giving us a bit of a tailwind on the next couple of quarters as well.

So the first not to be related to a itself, but mostly through marketing campaigns that are being resulting in solid increases in glass couple of months.

I think we do have a second question, Russia from the same Martini.

Just a just add.

Before we go to second question on trends.

Q1 was actually pretty strong following what we saw in the in Q4 and actually the entire second half of next year.

When we look into Q2.

We see somewhat softening, although continue to be very strong and we continue to see SMS volumes growing year over year.

Above.

Two digits high two digits so.

So.

Not as strong as it grew in Q1, we continues to be.

With the strong growth in Q2 in terms of volumes now go into the second question.

Any more color on Zimbra customer cloud.

Would be helpful to understand how the 15% year over year growth for customer cloud has been calculated.

Given that the customer cloud only launch in Q4 and does a 15% growth changed at one eight to 100 million BRL guide for the year given that it's lower than that 25, 30% productive growth.

So let me let me start here in Kosovo feel free to add on.

Anything here so.

When we talk about Zimbra customer cloud we always include.

What is.

<unk> Xavier customer cloud, meaning new clients since we launched in October coming in directly.

Into Zimbra Prisma cloud, but also.

B.

Former businesses that are being migrated and clients that are being migrated to zimbra customer cloud. So just to put into perspective, when we say about a 15% growth year over year. It includes new clients directly.

Directly in the makers Mcleod, but also.

We compare the growth overall of the what we call the Zimbra customer cloud plus which includes the clients been migrated.

Second.

Uh huh.

Obviously the debt.

We believe that as we ramp up and people get to know more and more zimbra customer cloud this will be accelerated and therefore, we continue confidence that this business will grow.

25% to 30% into in full year 'twenty five.

There's another question here on the webcast.

What are the current headwinds for the faster reputation for Zynga customer cloud are the Henry's associated with the current high interest rates are.

Customer cautious to migrate to Zimbra customer cloud Castle do you want to take.

Take us on the challenges that we see on the first.

Uh huh.

Months of Zillow customer class.

Sure, we're seeing strong adoption.

For new customers coming to serve a customer quality in terms of migration.

Being cautious when migrating customers because we want them to experience a very interesting improvement on their carbon solution. So we're taking time to get done by hand.

Having them understand what are the old.

Package there are being.

Supply to them.

This new solution gives them lots of different operators to adopt our zimbra customer crowd.

So I would say that we're being cautious to God. This customers to have a goods expressed or state and a platform to evolve their usage.

So it's all about the customer and cautious about it about us being.

Being cautious to bring them on off from experience when migrating.

Thank you consume.

Another one here could you. Please provide some color on asset sales progress how is the earn outs payments going and more color on deleverage.

So obviously we cannot.

As was the case in the previous earnings call, we cannot comment specifically on asset sale.

As a as we keep highlighting.

This is something opportunistic and well continue to evaluating opportunities if and when they.

Arise.

Aldo Russell in terms of our capital structure and already taking the next question here and putting them together.

We we are.

New too.

Seek a way to deleverage balance sheet faster and improve our capital structure.

This is important not only well obviously from a pure financial reason and with high interest rates.

Deleveraging is even more important but also because we believe that we.

We could accelerate our growth if we had a better capital structure compared to our total EBITA. So.

It's a.

Two it's not it's not a one way progress or a one alternative progress it will have to come from liability management as we've been doing and we did again in the first half.

Half of this year, when we renegotiated with some banks a grace period.

On loans amortization in it.

Also sales of noncore assets, if if it's the case so it's a it's a combined effort.

As you can see also we've been streamlining operation and reducing.

G&A expenses to accelerate EBITA. So all of the usual tools in combination that we have.

Deleverage balance sheet.

Hugo can you report there are no further question at this moment in the webcast.

Sure Chad.

Again, if you have a question. Please use the Q&A icon at the bottom of your screen to write it down and we'll open your microphone. If you prefer not to open your microphone. Please write down no microphone at the end of your question and our operator will read your questions aloud.

There's one more here can you provide us with guidance for the year or at least tell us how the trends are looking.

So the same way that we did in Q4, it's been a very volatile year.

Especially on.

On the shipper side and there are some ramp ups on the zynga customer cloud side, So we decided to give a.

Not to give a formal guidance for the year, but discuss short term trend. So as I mentioned in the first question when.

When we look into Q2.

The SMS b the seabed business continues to be strong although slightly.

The deceleration compared to what was a Q1.

And we continue to expect.

Xavier customer cloud and SaaS to continue growing it.

At the same trends that we saw in Q1 with some acceleration on zimbra customer cloud side.

EBITDA, we reported was a 20 million reais and in Q1 as we mentioned.

In our earnings release, there was an 8 million Reais, one one time expense related to severance costs.

As we discussed on January 13, the reduction or on our workforce.

And so if we consider around.

Closer to between 25, and 30 million rise in recurring EBITDA. In Q1. This is more of what it should look like in Q2, and then second half is usually stronger because of seasonality. So these are the trends on a quarterly basis.

We're looking at.

Yeah.

Yeah.

There are no Oh, there's one more question here.

Casio, how Xavier customer cloud is different from the solutions offered by competitors.

Okay.

Usually companies third using software further customer experience they tend to have a very fragmented.

Ecosystem providers, which means they use on software for marketing campaigns in order for sales and other one for customer support and some other solution for our customer engagement.

Sometimes a different provider for our automation chat bots and AI.

So what we were able to do is every customer cloud is to unify all of those processes and solutions into the same softer <unk>.

Meaning that it's in the same interface same logging some contract and business model are sharing customer data among all these different perspectives of our processes.

Which in practical terms means that you can draw a marketing campaign or shells process for serve your customer.

Serbs, our tickets sort of answer.

Having the data of all the data from our customer within the same place. So you can.

See the whole context of the customer and all these oh sure same database, which means every time you interact with the customer you have the data being.

<unk> for the whole customer journey, and what we're doing right now who knows if a customer called east two we're building we're all in customers to beauty.

Agents and also providing some agents.

That automate some of these.

Our operations such as it and hiring the best customers are helping to understand why does the customer contacts for some sport.

And all of these is able to be developed.

And provided.

Cause we are unified solution and that's not something you can easily make with this fragmented ecosystem. So majority of small and medium customers have no other way to make that happen. That's why they're seeing huge benefit from zimbra customer cloud and they have a large customers that we eat.

Didn't necessarily expect to adopt ever customer cloud.

As a visitor solution or are beginning to use our software for <unk>, we have a huge ah.

Banks and.

Retainers using zander.

Xander customer called as their solution.

And that's something we're seeing that there's a really a very good opportunity for us as white space that are being able to feel so that's why we are very excited about this solution being a somewhat.

And what's unique to the market.

Hum.

A follow up on this.

Can you talk a little about clients, who have been using customer cloud for longest what the trends look like how they mature usage just give us some cash to some our view on use cases and what's been go into clinical small clubs from a client perspective.

Sure. We're still early on the cohorts, but we're able to see the behavior of this customers easily adopting new modules.

By themselves.

Before zimbra customer part, where you where we provided our solutions as a standalone, which it solution as a standalone offering and we measured the cross sell.

Some of these solutions and where where it was very difficult to sell.

Cell Satcom software.

S.

Every time, a customer would consider.

Adopting a new software, we would compete with any other provider and we're able to provide a niche solution.

But as we provide zimbra customer allowed all the software and bad debt. There are a click away from current customers to try to experiment of these of new solution, which means they are.

Hey, there are doing marketing campaigns, if they want to engage with Scott with customers and make a film.

That's just a many menu items, they just click and they.

To start.

Interacting with these customers if they want to create is to provide a kick out of control or our customer support.

Just click and they're able to.

To test the solution. So this is.

Creating a huge effect of cross adoption of that it is around I would say 15 15 times, what we had before.

In terms of our cross adoption that we compare or relate to cross sell and that is getting very good traction for our customers every new customer that start with one module overtime. They easily go to a second arch with her more.

Module and that is happening throughout the customer base and as we build a business model that we created is able to monetize that as a charge for.

Interactions with customers it's.

Kind of a volume usage model.

We are able to monetize that so we see these cohorts growing usage and done the Upselling. Your plans are as they are continue.

Continuously use of all of these new adapter.

Adapter solution side. So that's the trend that we're seeing and all that.

A customer that are using days is very broad, but that's it's fair to say that we see.

Our house education, retail and financial services R. R.

Or.

Being like the ones that benefit the most of the solution and we thought would it would be mostly for medium sized companies, but we're also seeing large companies adopting our software. So that's kind of a.

And our next tax at a trend for us that we were seeing a card in the last couple of months. So that's pretty much what we're seeing nowadays.

Another one for you Cassio would love if you guys can provide more color into the new franchise model How's it going.

And our expansion into other countries in Latin America, how big is this an opportunity.

Sure just studying them in Latam.

When we look at our Zimbra customer cloud.

We have around the sharp to the correct me, if I'm wrong, but all on 40% of our revenues from this supplier is already coming from.

Uh huh.

Countries other than Brazil, and mostly off from from Latam.

So we see it as a very it's a very competitive solution.

Solutions that we're providing for the.

The whole Oh of Latam.

That's why we are investing to grow whenever start already seen rose.

For for Latam as well.

In terms of often franchise model we launched.

Sad about that model on Q1, beginning of Q1.

With.

Zero Parkhurst and we have more than 30.

Franchisees are.

Already contracted already are working with us.

That was our goal for the year, but we were able to achieve that.

The first half the year now, we're working with them on training and helping them on their trust customers and that is doing pretty well. That's why we are very excited with this new model.

Well I understand that while the year as these new partner as they mature we will able to see a important part of our growth.

From Xavier customer cloud coming from these model.

And that's what happens for all the years, where we're able to see.

The amount of growth and the amount of leverage that will break Gus said, but it's been interesting very interesting so far.

And <unk> just to add on on the Latam side. So.

It's been a while.

We've been putting more focus on that to have a team.

Based out of Mexico, and it's been a S.

As Kessel mentioned competitive, but we see opportunities we estimate around 50 million reais in revenues coming from.

From a bottom.

In 2025, so it's a it is a more than 50% growth and compare.

Two two to 2024, so it's so.

Strong strong strong improvement strong growth.

Obviously opportunities way bigger than this.

But it also as I mentioned, there's a lot of growth.

That.

It depends on our ability to deleverage balance sheet and being able to accelerate growth, but despite that we are very happy with what we're seeing in our Latam expansion is as we put focus on it and it's one of the.

Specific goals that we have.

For 2025.

Can you. Please address the issue of customer journeys is a result of your business transition what are you doing currently to retain customers.

Gotcha.

Sure.

I sort of have some solutions to Dara that we considered in our legacy solutions.

Where are we expect that to have a bit of a churn that is higher on these are legacy software down on Bob on the court.

Software when I look at the core software, which means as you said.

Yeah.

Hmm.

And the ones that are going to be migrated to the ship. There. We don't see a huge problem in terms of churn that as being a healthy of course.

She always working to get a better retention of these customers are usually what we have in terms of churn or these are a portion of the business is more early churn.

And these funds to be customers that are tried and at some point down their standards not the best solution for them.

But when we see the base churn there is pretty low on a run with Barrick benchmarks were.

Very healthy.

Our feet in terms of a churn.

Churn for the base of customers. So it's a mix of different portions of churn were reverse a fight in the churn level considering all of these aspects but of course, we're always working to get a not a mall not only a better rotation, but also.

Better to valid month of customers that stay on the base and we're able to do that with the cross adoption and usage volume usage business model.

Thank you thank you Kessel.

I'm not seeing any further question here, you who can ripple.

Again, if you have a question. Please use the Q&A icon at the bottom of the screen to write it down and we'll open your microphone. If you prefer not to open a microphone. Please write down no microphone at the end of our question and operator, we read the question aloud.

I guess, that's at a from a Q&A side behavior.

Okay. This concludes our Q&A session I would like to turn the conference back over to Mr. Cassio Bobzien for his closing remarks.

Thank you very much for everyone's attention.

We're very happy to share with you the results of Q1, and we're seeing a very interesting year for us, it's a euro off getting profitability and growth combined.

We're seeing the beginning of the year, giving good trends for the whole 12 2025. So expect you to see expect to see you in the next quarter.

The conference has now concluded Zen Dias IR area is at your disposal to answer any additional questions. Thank you for attending today's presentation. You may now disconnect have a nice day.