Semantix, Inc.

Good morning, everyone, and welcome to Semantics First Half 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. As a reminder, this call may be recorded. I would now like to turn the call over to Marcela Bretas, Semantics Chief Strategy Officer and Head of Investor Relations. Please go ahead.

Thank you. Good morning, everyone, and thanks for joining our first half of 2022 Earnings Conference Call. Joining me on the call today are Leonardo Santos, our CEO, founder, and chairman, Rebecca Federico, our general manager of WebSense, and Adriana O'Connor, our CFO. Hi, now. Everyone should have access to our earnings announcement. This announcement is also on our Investor Relations website. During this call, we'll make forward-looking statements, including statements about our business outlook, strategies, and long-term goals. These comments are based on our plans, predictions, and expectations as of today, which may change over time. Our actual results could differ materially due to a number of risks and uncertainties, including the risk factors outlined in our 20F that will be filed with the FTC. During this call, we will discuss certain non-GAAP financial measures. These non-GAAP measures are not intended to be a substitute for GAAP results. Please refer to our earnings release on our investor relations website for a reconciliation of GAAP to non-GAAP financial measures, as well as additional context on our key operating metrics. This call in its entirety is being webcast from our investor relations website at ir.financex.us, and an audio replay will be available on our website in a few hours. With that, I'd like to turn the call over to Leo. Leo, good morning.

Thank you, everyone, for joining us today on the What is the Semantic's First Earning Calls as a Public Company. For this, We are paying from us for the first time. I would like to talk a moment of introductions and mentions. Based in Brazil, with offices in Colombia, Mexico, and U.S., we are an end-to-end software as a service company that helps other companies to develop their data analytics and AI journey. We deliver our solution through a low-coach, low-touch, and cost-to-pay change approach, offering a strong competitive advantage in our view. We are the data analytics category leader in Latin America, and we are ready to accelerate growth in other regions. And as our general manager in Latin America, we will expand further on what we are and who we are in a few minutes. Before diving to our first half of 2022, main highlight, I would like to say that we are very proud of heading complete of the business combination with Alpha Capital in the beginning of August. You may have noticed that the cash from the D-SPAC transaction over total assets 2.5 times. Therefore, we are truly excited and confident about Semantic's future, and we see a multiple growth path ahead and now have the means to pursue new milestones and growing objectives. It's important to note that we expect the D-SPAC transaction to be concluded early in this year, since some regulatory problems took more time than we anticipated. In this context, Some of the replanted investments and projects end up beginning delayed. As Adriana will discuss in a few minutes, the revenues guidance we released yesterday takes the timeline change into consideration. With this as a backdrop, we still made great progress in execution, again, of the strategy and focus on our proprietary size products, which is increasing client engagement and upselling opportunities. will, at the same time, generate healthy margins for the calendar. In this first half of 2022, revenue from our proprietary products increased 25% year over year, and now represents 31% of the massive revenue mix, compared with the 24% in the same period of 2021. And underlying metrics that's highly the health of the adoption in the proprietary products in ARR. It increased 62% in June from the prior year period. We remain committed to investment in accelerating the growth of our proprietary technology. Since January, we have announced multiple releases, including the data and AI marketplace, offering a new array of the features of our users and analytics chat. which have provided users with insights of their business performance. More recently, we also added real-time and streaming capabilities to the platform that can potentially cater to $50 billion total addressable market. In the first half of 2022, we added 42 net new customers, including the leading players in the restaurant, home, and home-applied retail. segment as well as large established farm and health insurance companies. In addition, to expand our customer base, we are seeing an increase in overhead sales deal size, which we think can demonstrate that we are increasing delivering more value to our customers. Lastly, I place the two announcements over acquisition of the Zephyr Health Analytics. The additional of Zeta aligns with our inorganic growth strategy of products and market expansion and demonstrates an effective use of the proceeds for our recently business combination with our account. Zeta brings a new layer of the segmentation of the healthcare industry to our platform, in addition to importing industry database and market-approving proprietary products. In summary, we have made our entrance onto the public market backed by an incredible group of investors, and I'm pleased with the progress we have made in the very shortest window of the time since our merger closed. There is a lot of work to be done, but I'm excited about the largest and growing opportunity across our end-to-end markets, and confident in our ability to realize our growth priorities. With that, I would like to turn the call over to Andrea Federico, our general manager from Latin America, who will jump in and talk about our go-to-market strategy and achievements. Thank you, Leo, and thanks again to everyone for joining us. At the core of Semantic Strategy is a proprietary, high-capable, and end-to-end data analytics platform. offers our customers substantial ROI relative to the multi-vendor solution. We are continuously enhancing and improving the semantics data path, demonstrating to our clients that we can enable them to extract value from data in a time efficient way without having to hire a large and expensive team of experts. Extracting value from data is not a simple task. and each industry has a different level of complexity. We are determined to solve our customers' problems by providing them with plug-and-play solutions that are highly customizable. For that reason, we have designed vertical solutions within our platform containing specific big data and AI building blocks for key industries we serve. One example is the semantics data platform for house. serving hospitals, clinics, and healthcare insurance operators. With the acquisition of Zeta, we will be able to develop this vertical even further. We have a massive opportunity ahead, especially taking into consideration that we operate in markets where most companies still have a long way to go in pursuit of their data and AI journey. Our end-to-end business model gives us a competitive advantage as we can serve not only large companies, but can expand into medium and small companies more. We have built a differentiated platform and have the resources we need to accelerate our go-to-market efforts and increase brand awareness, focusing primarily on driving growth of our proprietary software. Overall, in the first half of 2022, we saw material increases in our proprietary SaaS pipeline and added several new proprietary SaaS clients. We revenue contribution from proprietary SaaS reaching a mix of 31% of total. These clients represent a diversified set of industries, such as agribusiness, the food supply chains, credit bureaus, among others, demonstrating the wide range of use cases and capabilities of our platform. Additionally, in Q2 of 2022, we have doubled the size of our sales team, materially increasing our capacity, and we are already starting to see an improvement in sales team productivity and conversion rate. which we expect to accelerate over the next several quarters. Leveraging our directives team, supported by our growth channel presence, enables us to broadly expand our reach. And by doubling down our marketing initiatives in the second half of the year, we expect the pipeline to increase even further. On that note, I'm pleased to hand over to our CFO Adriano Alcázar. Thank you, André. I would like to start by providing an overview of our financial performance in the first half of 2022 before moving on to our guidance for the full year of 2022. The total net revenue for the first half of 2022 was R$86 million, down 10% year-over-year, due primarily to an early contract termination by a single client at the end of the first half of 2021. Proprietary SaaS products grew 25% year over year, with proprietary ARR increasing 62% from June 2021 to June 2022. Growth in proprietary SaaS and ARR are completely aligned with our strategy on focusing on our proprietary software as a key growth driver. For our proprietary sales gross profit, we had an increase of 24% in the first half of 2022 compared to the first half of 2021. This reflected in our proprietary sales gross margin growth of 22 basis points. Adjusted SG&A net of merger-related costs and stock option plan grew 84% year-over-year. This increase in SG&A was expected due to investments in the company's expansions, both national and international, investments across our sales teams, and product developments, new functionalities, and focus on innovation, as well as our go-to-market strategy. These investments are already beginning to bear fruit, as evidenced by our growth in our pipeline, particularly for our proprietary products. Total net loss for a period was 86.2 million reais, compared with 23.1 million reais in the first half of 2021. Note there was no significant impact to our balance sheet from the merger completion, since it occurred a little over a month after the end of the first half of 2022. However, a big growth is expected next quarter to the cash injection of approximately 600 million reais, which would grow our total assets from 240 million reais to 840 million reais. We plan to use transaction proceeds in three main areas. First, continued investments in our products, especially proprietary products, as well as our sales team, international expansion, and go-to-market strategy. Second, we plan to engage in part of M&As, with an emphasis on searching for partners that significantly contribute to our platforms and our whole ecosystem. Third, we intend to reduce some of our company's debt. Now, I would like to discuss our outlook for the remaining of the year. As a reminder, and as Leo already mentioned, the changing time of our merger delayed investments in headcount and implementation of both market strategies. With that said, we expect our net revenue for the full year of 2022 to be between R$262 million and R$290 million, implying a growth range of 24% to 37% compared to the full year 2021. Our guidance does not assume any contribution from M&A. The first half of 2022, as well as the first couple of months of second half, were a historical period for Sematics and our whole team, as well as for all Latin America, with the IPO of the first deep tech company from Latin America in early August. We are extremely proud and excited for this new chapter of Sematics. With that, we thank you all for joining and I say back to the the operator for the Q&A.