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spk04: Good morning and thank you for standing by. Welcome to Zangier's third quarter 2021 earnings conference call. Today's speakers are Mr. Kassir Babsi, Zangier's founder and CEO, and Shai Shaw, investor relations officer. Please be advised that today's conference has been recorded and the replay will be available at the company's IR website, where you can also access today's presentation. At this time, All participants are in listen-only mode. After the report remarks, there will be a question and answer session. For the Q&A session, we ask you to write down your question via the Q&A icon at the bottom of the screen. Your name will then be announced and you will be able to ask your question live. At this point, a 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 your question. In this case, our operator will read your question aloud. Now, I would like to welcome one of your speakers for today, Mr. Cassio Babsin, founder and CEO. Sir, the floor is yours.
spk02: Welcome to Senvia's Q3 earnings call. I'm Cassio Babsin, founder and CEO of Senvia. Today, we're going to present the key highlights of the quarter and provide you with an update of our business. I'd like to start by highlighting that we delivered on what we promised investors during our IPO process in late July, solid revenue growth and strong gross margin expansion year over year. Shai will review with you the numbers in more detail, but I'd like to highlight a very healthy revenue growth above 40%, with more than 60% increase in adjusted gross profit and a 4% point expansion in gross margin. We are confident in our ability to continue delivering a strong set of results in the next couple of quarters. I'll tell you how in the next slides. Here at Senvio, we are building a long-term vision from the ground up. Let me explain a little bit more how we evolved and where we are headed. In our early days, 18 years ago, we started by enabling communications for our businesses with their end customers. We would enable our clients to send one-way messages with product offerings and services through our platform. After some time, we started enabling conversations for our customers, so the one-way message became two-way conversations. A good example of this is when a customer from our client can chat with a person or chatbot for support. Today, we're moving to our next digital phase of enabling journeys that happen when the end customers of our clients are engaged in a variety of ways across their lifecycle through multiple communication channels. But we are already foreseeing and preparing for our next phase, which will be focused on enabling experiences, allowing customers to experience a streamlined relationship with the brand, no matter the channel or moment in time. On their minds, everything will be perceived as a continuous conversation, resulting in more valuable customer interactions and brand loyalty. Let's move to the next slide to better understand it. So how do we do this at Sanfia? Our unified end-to-end platform currently provides our customers with a combination of channels that enable them to talk and engage directly with customers in multiple ways, tools that enable these channels to be automated and integrated into the company's processes and systems, and software service solutions that are suited for each moment during the customer journey. This is how we got here, but as I said, we are already evolving, and this evolution is data-driven. The ability to collect data and build better profiles of the end customer is becoming increasingly relevant to companies working in the customer experience as a service segment. In this sense, for us, the main change is that data will now be at the core of our platform. By reusing data analytics, we can provide our clients with actionable insights, enable them to generate automated customized actions in different touchpoints of the customer journey, creating more and more personalized and seamless experiences to end customers. And here is where our M&A strategy is key, as you will see in the next slide. We have been pursuing acquisitions to grow throughout our lifetime. Until our IPO, we had completed eight acquisitions. In the beginning of November, we announced our first transaction after the IPO. We acquired Sense Data, a very strategic movement for us as it represents the first step into putting data in the core of our solutions. SenseData was founded only six years ago, conquered 140 clients across 13 different industry verticals, mainly in finance, retail, health, and software. Its annual recurring revenues grew by 75% in the last 12 months to approximately R$ 11 million, with an adjusted gross margin of 60% on a standalone basis. We estimate acquisition to be done at a multiple of 2.2 times EV over sales 2023, at the end of the earn-out period. SenseData solutions based on these three main concepts and technology. SenseConnect, this proprietary framework simplifies integration with several software platforms to connect customer data in a fast and secure way. SenseScore, the main feature behind SenseData's success, is its proprietary platform and framework to analyze data in order to generate valuable analysis about each customer's journey. And actionable insights, sense data technology that enables companies to create automated communication processes based on sense score that lead to better customer experience and engagement. Still on the M&A topic, I'd like to provide you with a quick update on D1 integration. We've been moving fast into integrating D1 with our platform, with their customer base already benefiting from the scale and robustness of our communication channels. At a commercial front, we've been working together to lead the CX transformation of our enterprise customers, joining forces and expertise to move these customers-based communication processes into a journey-wide implementation that is integrated and leveraged by data and AI. Finally, we are seeing a lot of opportunities to continue consolidating the market. Our strategy will continue the same, to acquire companies that can complement our technological ecosystem and our pool of talent, and therefore improve our value offering. I'll now pass on to Shai, who will discuss our key financial metrics in more detail.
spk01: Thank you, Cassio. This is my first earnings call since I joined the company two months ago. I'm excited with the challenge of helping investors better understand our company. I believe we're flying below radar screen, and this is the main reason why our shares are undervalued. We are working to change this, and as Cassio mentioned, we are confident in our ability to continue delivering improved results and generating positive news flow. Before I move into the numbers, I would like to emphasize that as of Q3, we are already consolidating D1 in our results. For this quarter, we have only two months of D1, so Q4 will actually be the first one with full impact of D1 acquisition. Now moving to the results. Our client base grew by almost 25%, ending the quarter with 11.3 thousand active clients, already consolidating both Sirena and D1 in our base. Our strategy allows us to retain existing clients and to continue growing their usage of the platform through upselling and cross-selling. This directly impacts our net revenue expansion rate that reached 122% in the quarter, a 10 percentage point increase when compared to the same period of 2020. And also 5 percentage points from June 2021 when it was 117%. These numbers do not include D1, as in this metric we only consider clients that have been in the base for 12 months. If we were to include D1 clients, the net revenue expansion rate would have been 128% in this quarter. All this led consolidated revenues to expand 43.7% to R$163.7 million, accumulating R$422.1 million in the nine months period. Revenues beyond SMS termination already accounted for 32% of total revenues this quarter, a sequential improvement when compared to the 22% in Q2, and double from the 16% reported in Q1, even with higher revenues. This is in line with our objective and promise of improving revenue mix to generate higher profitability and attest to the solid execution of our team. Our adjusted gross profit increased 61.5% year over year to R$57.8 million, reflecting the solid revenue growth. In addition, as a result of the evolution of our platform, both organic and inorganic, we estimate that the portion of our business that goes beyond SMS termination represented 60% of our adjusted gross profit in Q3. This improved mix led adjusted gross margin to improve 3.9 percentage points to 35.3%, a record high since Q1 2019, which attests for the improvement we have delivered quarter after quarter for a while now. Xavier have been a profitable company, since the beginning of its operations during late 2018 we realized our unit economics work and then we had a large and untapped market opportunity ahead of us. As a result, during 2019 we decided to reinvest in our business to accelerate growth expand our platform and capture share in this highly fragmented market. By design and with the full support of our board and shareholders, we have reduced our EBITDA margins in order to invest heavily in sales and marketing and R&D to accelerate our go-to-market strategy. With that said, our normalized EBITDA in the first nine months of 2021, which excludes expenses related to earnouts, was positive R$ 4.1 million. Let's move to our mid-term guidance. Given the solid set of results we have delivered in Q321, our pipeline of acquisitions and our confidence in continued delivering strong growth with high capital efficiency, we will reiterate our objectives for the next two to three years. Revenue growth ranging between 30% and 35%, gross margin reaching 45% to 50%, and finally EBITDA margin scaling back to historical levels ranging from 15% to 20%. This concludes our prepared remarks. We can now move to the Q&A session.
spk04: We will now begin the question and answer session. Once again, for this Q&A session, we ask you to write down your question via the Q&A icon at the bottom of your screen. Your name will then be announced and you will be able to ask your question live. At this point, a request to activate the microphone will appear on your screen. If you prefer not to open your microphone live, please write down no microphone at the end of your question, and our operator will read your question aloud. Okay then, our first question comes from Victor Pichut, a self-site analyst from UBS. We are now opening the audio so that you can ask your question live. Please go ahead.
spk00: Hi everyone, can you hear me? Yes, yes, we can. Go ahead. Okay, perfect. First of all, thank you very much for taking my question. I have one question regarding margins. In the third quarter, you have spent around 50% of revenue in GNA and an IPO bonus of 40 million reais, both of which impacted your margins. We would like to understand what can we expect as recurring expenses going forward and what can we expect in terms of short and long-term cross and EBITDA margin? Thank you.
spk01: Thanks for the question, Victor. So if we look into Q3, actually, we had a total of 45 million reais in one-off expenses related to the IPO. So when we exclude that, the GNAS percentage of revenues was around 21%. That compares to 23% in Q3 of 2020. So this is the level of G&A as percentage of revenues should expect in this range between 20% and 23% going forward. As to EBITDA margins, as we said, we had... we've been accelerating our spendings in sales and marketing and R&D. And this will continue in the next couple of years. And that's why we have that mid-term objective, which means between two to three years, of bringing EBITDA margin back to that 15% to 20% historical level that we had in the past.
spk05: Perfect. Shai, thank you very much.
spk04: Thank you for your question. Once again, if you have a question, please use the Q&A icon at the bottom of the screen to write it down, and we will 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 question aloud.
spk01: Roger, I have a question here on the webcast. No voice, so I'll take it. Could you please disclose organic growth X at D1 and what percentage of customers now use more than one product? I'll start with this. And this has been a question that we've been getting about D1. So in Q3, Zenvia without D1 grew revenue by 30%. And then the rest was D1. So this gives you an idea of the organic growth that we've been delivering in Zenvia. In terms of gross profit, just to add this, gross profit expansion without D1 was 36% considering Zenvia only. And I'll let Cassio, do you want to comment on cross-selling and how much of our products, our clients are using more than one product?
spk02: Yes, thank you. We, unfortunately, don't disclose cross-selling metrics on a quarterly basis. We expect to have that metric available in our investor day. Last time we disclosed that was around 15%. And we are working into improving that cross-sell for the following quarters. And just to get a better understanding of this third quarter, D1 accounted for around two of the three months on the period. where it didn't get the impact of the full D1 numbers on this quarter.
spk01: Okay, we have more questions here. Have you seen any impact from weaker macro in Brazil? Are you seeing upward pressure on staff costs and how difficult has been to hire talent, especially developers?
spk02: We're not seeing major impacts in terms of economic aspects of the countries we operate, especially Brazil, although we understand the market is quite dynamic on the projections of GDP for next year. We always had a positive growth on the company, even the times that we had a crisis and depression occurring within the region. So that's why we don't expect to slow our growth considering any impact of economic recovery in the country. And talking about talent, we keep investing and growing our talent pool. And we have been working pretty well in that sense. We expanded our headcount in a very important direction in the last quarter. And we expect to grow headcount according to our strategy in terms of investing more in sales and marketing, more in R&D. Of course, diluting our G&A expenses as we are expanding our revenue and our gross profit over time. They tend to get lower pressure on the G&A. But talking about talent itself, we see that the market is hot for quality people that are looking for opportunities and we're performing pretty well in attracting the best talent for the company.
spk01: Roger, do you want to check if we have questions for voice?
spk04: Okay, then. Let me check. And perfect. The next question comes from Dito Tomita, a by-site analyst from Goldman Sachs. We are now opening the audio so you can ask your question live. Dito, please go ahead.
spk03: Hi, thanks for taking our question. Quick question from our side. I suppose we could estimate that from the organic growth figures, but would you have a figure for pro forma revenue and gross profit exposure to beyond SMS termination revenue in the third quarter? Not sure if I might have missed this during the original presentation. I had some connection issues on my end.
spk05: Thank you.
spk01: Thank you, Vitor. Actually, we're not disclosing pro forma for SMS termination. So it will not be that far from where it landed. because actually we are consolidating, remember, we are consolidating two months of D1 already. So we would not be that far. Just to give you in terms of total revenues for you to understand, we reported R$163.7 million, and pro forma for D1, we would have reported R$171 million. So that would be the difference in total revenue. So it gives you a sense that the difference in the revenue mix and the gross profit mix would not be that difference. Another point to help you is that gross margin we reported 35.3% and pro forma it would have been 36%. So that gives you a sense of the impact.
spk03: Thank you. And just another question from our side, again, that wasn't discussed yet. Could you give us some more details on a more detailed update on how your acquisitions pipeline is looking following the acquisition of SenseData? Thank you.
spk02: Yeah, I've been working intensively on the Amoni pipeline. I have several opportunities of being involved working in the last couple of months. And we expect to have, I would say, a few occurring so we can, of course, get the user proceeds applied in a way that we are accelerate our strategy of evolving our portfolio. That's the main strategy that we've been working on in terms of M&A. And then we expect these to really add valuable solutions to our platform that would make total sense in terms of evolving our positioning as a consolidator of the CX landscape across LATAM.
spk05: Very clear. Thank you very much.
spk04: Thank you, Vitor, for your question.
spk01: So I have more questions here on the webcast. Can you please update on growth outside Brazil? This appears to be a bit slower. When should we see an acceleration in benefits of indirect channels in new geographies?
spk02: Actually, we're seeing a very strong growth also in Brazil. We are seeing that we're growing all the time, but Brazil is still growing pretty strong, which actually shows that we have a pretty large town. And we have several opportunities within Brazil, of course, as well as with LATAM. So we've been evolving in both directions, benefiting from all that TAM in Brazil and also in these regions and scaling and rolling out our solutions to other countries. We're in the middle of that as some of these projects products that we acquired more recently, they were solely focused on Brazil. A part of the integration is to roll out those solutions to become global solutions.
spk05: So that's why we expect that to be further accelerated in the future.
spk01: Next one is, can you please comment a bit on the competitive landscape and what is the impact on Zenvia's business directly and indirectly, if any, from changes in Apple third party tracking, upcoming changes at Google, et cetera?
spk02: Yeah, looking at the big tech ecosystem, we are not affected at all. by these changes in Apple as we work mainly with direct communication channels, which means we're not in any form dependent of any media or ad or display ad or that kind of Google and Apple market decision. So it doesn't impact our business at all. And looking at the competitive landscape, we're seeing that companies are really going in a very strong way for these conversational channels. And they're trying to become less dependent on these closed ecosystems where you don't see who the customer is. And for ecosystems that are more open, then you can actually talk directly to an end customer and then make that relationship happen. And that's why we're developing our platform to become the Ant and CX communications platform that will connect the dots along the journey, enabling companies to really create better experiences through this communication channel. So in that sense, we compete mostly with niche SaaS offerings that are usually spread all over the regions we operate. And as we've been growing the platform and scaling it, we are seeing that the developer position we're building is very competitive against this small niche players. And we also face sometimes competition from global, more enterprise-focused solutions. And when we compete with them, we are much cost-efficient for local and regional companies, which means they can have the same technologies and benefits with us with a much better price and a way to customize and to evolve adoption of their own processes in a way that opens up a really big opportunity for us to consolidate that something and also enter the enterprise customers with solutions that are much more interesting than they find and as global players so next next question comes from uh christian faria at itaubba
spk01: Can you comment on the drivers for the net revenue expansion? It increased 10 percentage point year over year. So I'd like to understand better what's behind that growth.
spk02: Yeah, I would say that major aspect is that we keep churn low and we have everything that we do growing. And that basically adds and composes on our RR. We see... solutions based on as a master are still growing. We see that there's new solutions that are more for conversational based communications with WhatsApp and Instagram and web chat. They're growing pretty strongly. And as we are also entering that journey, part of our strategy, we're helping companies to connect data and create very interesting ways to engage the customer. This is creating a very powerful way to get deeper into these companies. So we're improving our presence on the enterprise customers. That's driving a lot of these. And we are getting lots of efficiencies and retention, improving retention and adoption of also from the F&Bs. So that's basically a combined a combination of all these forces that are giving us a healthy NRR, and hence we expect these NRR to get to be even improved in the future as we roll out of these cross-sell and off-sell initiatives that will unlock all the potential that we have in terms of the platform robustness and completeness of vision.
spk01: One more here. Casio, in the earnings release, you mentioned Instagram as a new channel. Can you elaborate more on that and tell us where you see that going?
spk02: Yeah, definitely. As we're... We've been positioning our solutions as multi-channel solutions. The addition of Instagram is going pretty smoothly to our customers. We're helping them to set up the channel with the current solutions they already have, which is giving us better lock-in. And it's also creating a stronger network. a new stream of conversations with customers as these companies open. Every time a company opens up a new communication channel with customers that they are already using, this gives us more usage of the platform. And that's the path that is occurring with Instagram. As we rolled out a couple months ago, we already have a couple hundred customers using actively this channel and expect to be a massive channel as SMS and WhatsApp in the future.
spk01: Next question here is, I think you mentioned that in your remarks, but I missed a number. Can you repeat what was the NIR performer? So, yeah, as we commented in the call, the NIR, Net Revenue Expansion Rate performer for the one was 128%. versus 122 reported without D1. Roger, do you want to report to see if we have more questions?
spk04: Let me check right here. And just another reminder, again, if you have a question, please use the Q&A icon at the bottom of your screen to write it down, and we will open your microphone. If you prefer not to open your microphone, please write down no microphone.
spk05: at the end of the question and our operator will read your question aloud. Okay then, this concludes our question and answer session.
spk04: I would like to turn the conference back over to Mr. Cassiobobson for his closing remarks.
spk02: Thank you very much everybody for joining us this Q&A session and our webcast. It has been an awesome trajectory as a public trade company the last couple of months. And we are very excited about everything that we've been delivering and the plans that we have, the vision that's becoming a reality. And we expect in the next couple of months to engage again with you guys to better explain and give you another milestone of that long-term strategy. So thank you very much, everybody.
spk04: The conference has now concluded. The VSIR 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.
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