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spk02: Good morning and thank you for standing by. Welcome to Zenvias Q4 2022 and full year earnings conference call. Today's speakers are Mr. Cassio Bobzin, Zenvias founder and CEO, and Chai Chhor, CFO and Investor Relations Officer. 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 today's 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 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 your microphone will appear on your screen. If you do not wish 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.
spk06: Hello everyone and thank you for joining us at Senvia's earnings call. I'm Cassio Babsin, founder and CEO. Today we're going to review our performance for the fourth quarter and full year of 2022. Let's start on slide four. When I look back to 2022, the main word that comes to my mind is integration. As you all know, integrating an acquiring company into a business is a complex task, especially in our case, as we're building a unified CX SaaS platform, which requires a full integration. So, I'm happy to report that we reached the end of the year with D1 and MoviDesk totally integrated into Zenview, and with earnouts already negotiated. This means we are now more than ready to fully explore the synergies that come from offering the most comprehensive CX SaaS platform in Latin America through a full suite of products, attraction, conversion, service, and success, and accelerate our growth. As we have been saying every quarter here, there is still a huge white space opportunity in the CX SaaS market in Latin America, and we have just begun to tap it. But there are also big opportunities coming from AI that I'd like to discuss with you. We are at the dawn of a new era, one where generative AI will generate massive opportunities within the SaaS industry, allowing hyper-personalization, behavioral prediction, and actionable insights. It is a brand new world for CX, and we are very excited to be a leading player in it, as we've been already integrating chat GPT technology in our platform. Throughout the year, we expect to drive a whole new set of automation and efficiency improvements to our platform as we take advantage of these new technologies that are being widely demanded by our customers. I will now turn the floor to Shai for his remarks. I'll be back after that for the Q&A.
spk04: Thank you, Cassio. Hello, everyone, and thank you for being with us today. In the last quarter of 2022, we kept executing our strategy focused on balancing growth and profitability. And I can affirm that we did that. We are reporting solid evolutions on gross profit and gross margin, which allowed us to generate positive EBITDA and operating cash flow. These were indeed the best quarterly profitability metrics since our IPO. And the first quarter where we surpassed 100 million reais milestone in gross profit. We did this despite the challenging and more competitive environment that we experienced not only this quarter, but most of the year. Even though our total revenue dropped 8% year-over-year as a result of our focus in a profitable CPaaS business, the SaaS business continues to be our growth engine, with a top-line performance expansion of 44% when comparing Q4 2022 to Q4 2021. Our gross profit jumped 65%, adding 26 percentage points to our adjusted gross margin that reached 58.6%, which attests to our full commitment and path towards profitability. Let's take a look at the same picture for the full year. For the year, we can see double-digit growth in all metrics. We grew revenues by 24%, gross profit by 68%, and gross margin by 12 percentage points, leading us to a normalized EBITDA, which excludes non-cash impacts from earnouts and impairment, of R$23.5 million. This is directly related to a combination of solid SaaS growth and more profitable CPaaS. added to our focus on strict cost control and cash preservation in the year. Let's take a look at how each of our businesses contribute into profitability. Here on this slide, you can see the breakdown of our gross profit mix by SAS and CPAS and its evolution throughout the year. We can see sequential increases in both SAS and CPAS margins, which means that our focus on profitability paid off. CPaaS delivered a solid 41% sequential increase and a 62% expansion when compared to the second quarter, when we started to see a more competitive environment. Our SaaS business surpassed the R$50 million gross profit mark this quarter, an 18% sequential increase leading to R$102.5 million in total gross profit. Comparing Q4 to Q2, the increase in gross profit was 33%. Let's now look at this data in terms of weight in our financial metrics. As we've been saying since our IPO, we are on a mission to transform Zenvia into a SaaS company. And I'm very proud to report that our SaaS business is close to reaching a quarter billion reais in size, with an annual recurring revenue of 239 million reais in December. Net revenue expansion totaled 124% in Q4 compared to 123% in Q3 2022. Even though Q4 is seasonally a strong quarter for CPaaS, because of high holiday sales like Black Friday and Christmas, our SaaS services represented 41% of the total revenue in the fourth quarter, a large sequential improvement from Q2, when SaaS was only 29% of total. For the year, we already see 34% of our revenues coming from SaaS. In terms of gross profit, we had a split result this quarter, with SaaS representing 53% of gross profit for the full year. Looking ahead, long term, we expect SAS to represent about 70% of our gross profit. We're just beginning to tap the huge white space in the SAS market in Latin America. We are working hard and confident on our strategic planning. Let's now move to the next slide to comment on the evolution of our gross margin. On this slide, we present our gross margin evolution since the beginning of 21. We have delivered on the promises made during our IPO. We have expanded our margins in Q4 significantly, a double-digit expansion from both the IPO and Q2 of 2021, as well as from the same quarter last year. From Q1 2021 to Q4 2022, it more than doubled. We reached a gross margin of almost 59% in Q4, taking the full year margin to 44%, as you can see in the orange bar to the right. This is above the top range of our updated guide for the full year 2022, and yet another proof that we are walking the talk on our path to profitability. Looking ahead, it is worth noting here that we do not expect cross-profit for 2023 to remain at the same leverage in Q4. We'll discuss this in more detail in our 2023 Guidance More minutes. Let's move to the next slide. In this slide, we show how organic and inorganic growth contributed to 2022 revenue. The three more recently acquired companies, D1, MovieDesk and SenseData, added 156 million reais to our consolidated net revenues for the year. This number compares to R$41.5 million in contribution in FURIA 2021, when we consolidated only four months of D1, two months of SenseData, and zero revenue from MovieDesk. It is worth noting that XMNA, our revenues grew 5% year-over-year, while our gross margin jumped a solid 32%, once again demonstrating the result of our strategy to focus on increasing the profitability of the more mature CPaaS business. Let's now address our efforts on the cost side that were relevant to our full year results. As of July of last year, we have begun implementing cost-curry initiatives, especially as we accelerated the integration of the acquired companies and started extracting synergies. In addition to reducing non-personnel G&A expenses, such as consulting and travel, among others, we also announced in November a downsizing of our corporate structure equivalent to 9% of the total workforce in Latin America. We incurred a one-time expense of R$ 5 million that was registered this quarter, mainly related to severance. In turn, we expect to capture approximately R$ 70 million in reduced costs in 2023 onwards, being R$ 40 million from the downsizing and R$ 30 million from the other cost-cutting initiatives. We have been pursuing more efficient operations in the second half of 2022 and will continue to do so constantly to improve EBITDA as demonstrated in the next slide. As a result of a very well executed strategy in a very complex environment, we recorded in the fourth quarter R$ 23 million in normalized EBITDA, evidencing the profitability of our operation. A closer look at the quarterly trend in this chart shows how our EBITDA improved quarter after quarter during the year, with Q3 putting us at break-even for the first nine months of the year, while Q4 led us to beat our guidance for 2022. During the quarter, we registered a goodwill impairment of 136.7 million in the SaaS business, related to the slower revenue growth in the medium and long term on the back of a more challenging macro backdrop, and a higher discount rate reflecting an increased perceived risk. Including the non-cash impact from the goodwill impairment and earn-out expenses, our reported EBITDA was negative 189 million reais in the quarter and negative 214 million reais in full year. You can find a detailed EBITDA reconciliation in our financial statements. Let's see how our full 2022 EBITDA compares to historical numbers on the next slide. Here you can see the evolution of our EBITDA metrics in the last five years. We are happy to see the reversal of the negative trend as a direct result of the decision to pivot Zenvia into a SaaS company, bringing this performance back to the profitability path that has always been part of the 19 years of our history. It has not been easy, especially given the complex market environment, but it has paid off. Both the quarterly trend we saw in the previous slide with a strong exit rate for the year and a history of delivering profitable operations shows in this slide makes us confident in our capacity to deliver not only a solid EBITDA expansion in 2023, as we'll discuss in a minute, but also a new record in EBITDA generation next couple of years. More than generating solid EBITDA, we have been very much focused on converting this EBITDA into cash. This slide shows that our operations generated a positive 27 million operating cash flow. This is a combination of our focus on profitability coupled with a strict working capital management, allowing us to maintain a healthy capex level to keep investing in innovation. Even after paying interest and amortizing debt, Our cash flow would still have been almost R$ 10 million positive in this quarter. Before we move to reviewing how we did against our 2022 guidance and provide guidance for 2023, I would like to quickly remind you of the agreement with D1, MovieDesk and SenseData to extend the payment agreements of the earnouts, which allowed us to drastically reduce our funding gap until the end of 2023, as you can see in this slide. We were able to reduce the total amount to be paid in 2023 to approximately R$ 62 million, down from R$ 420 million by extending the payment schedule to the fourth quarter of 26. To finalize, let's review our 2022 performance versus guidance and discuss our expectations for 2023. This slide summarizes our 2022 guidance versus actual figures. In terms of revenues, we remained within guidance ranges for all provided metrics, with CPAS closer to the low end, while SAS revenues were practically in the mid-range. In turn, all profitability metrics were above guidance. Gross margin came at 44%, above the 40% we guided, with both SAS and CPAS margins also above guidance. CPAS was 31% against 27%, and SAS was 68% against 65% guidance. The year-over-year evolution of the gross margin was 11.7 percentage points, well above that 7.7 percentage points at the top of the range. And finally, normalized EBITDA of R$23.5 million that was also above our guidance of between R$10 and R$15 million. With a solid delivery on our 2022 numbers versus guidance, we are introducing our guidance for full year 23. We expect our revenues to be between R$ 830 and R$ 870 million, implying a 12% top-line growth at the middle of the range, boosted by a 30% to 42% expansion of our SaaS business, while CPaaS should stay flat, reflecting its more mature stage. Our gross margins should remain at a similar level compared to 2022, as we expect the higher SaaS and the revenue mix should be offset by lower margins on CPaaS. Finally, we expect our EBITDA to be between 70 and 90 million reais, implying that our EBITDA margin should be close to 10% level, putting us on track to deliver the 15% mid to long term level that we presented during our 2022 investor day. With this review of a solid quarter and high confidence in our business for 2023, we conclude our prepared remarks and are ready to take your questions.
spk02: We will now begin the question and answer session. uh 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 your 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. Our first question comes from Gabriela Moraes, sell side analyst from Itaú BBA. We are now opening the audio so that you can ask your question live. Please go ahead.
spk00: hello guys uh good morning thank you for taking our questions we have two points here on our sides uh the first one is regarding profitability we saw an important expansion in profitability this quarter and we would like to know that uh besides the cutoff in workforce what are the main other drivers or initiatives to boost the ebitda margin in 2023 and the other question is regarding the top line uh dynamic is in the communication as a service division When do you guys expect to see some starts of improvements on the revenues growth in this segment? That's basically it, guys.
spk01: Thank you very much.
spk05: Thanks, Gabriela.
spk04: I guess Caio can take us with the details. Let me just give a brief reminder here. We are expecting approximately R$ 70 million in savings in 2023, coming from all the effort that we did as of mid-year of 2022. Approximately 40 million comes from personnel, as we've been saying. And there's about 30 million in other lines. And Caio can provide some details on where these 30 million are coming from.
spk03: Yeah, of course, Shai. The 30 million is mainly coming from the reprioritization of our initiatives. And we are starting to map. We did map already. all the expenses that we can cut and not impact the performance of the business or we can do without third party do it ourselves. So coming from consulting, coming from also travel expenses and so on. So we did a really detailed job here on mapping all the expenses that we could cut without impact the performance of the business.
spk04: And Gabriella, I'm sorry, you cut a little for me. Can you just repeat your second question?
spk00: Yeah, sure. It's regarding the revenues growth in the communication as a service division. When do you guys expect to see some improvement in the revenues growth of this division?
spk04: Okay. So as we've been saying for our CPaaS business, as the end of Q2 of 22, we started to see increased competition with some players even going to a price that from our perspective would lead to negative profitability. So we decided to try and find the right balance between growth and profitability. So it has been very volatile from this perspective, from what we see in the market. The second half of last year continued with this strong competition. We are seeing the market less competitive in the first months of 2023. In our guidance, we embedded about flat in terms of CPAS. It will essentially, Gabriela, depend on how the market behaves in terms of pricing. This is not a business where we look into margins in terms of profitability. We look into profitability in terms of absolute profitability. reais generated because this business generates cash and this cash is the cash that we use to continue investing in expanding our SaaS business. So because we stopped looking into margin in percentage terms and start looking in absolute reais terms, we are less concerned with how top line behaves and we are way more concerned with how much gross profit we are generating. So as long as gross profit is growing, That's what we will be aiming at. That said, again, we are seeing the market in the first months of 23 behaving much better in terms of pricing than it was in 22. I don't know if Caio or Casio has anything from a more high level perspective to add here.
spk06: Thank you, Neil. We're seeing a market that is kept in strong pace in terms of demand for CPaaS, although at some times it becomes more competitive. We should be able to achieve what we are focusing on, which is profitability. And that's doing pretty well. We're looking forward to see a nice way to move into the whole year in terms of profitability from CPaaS.
spk02: that's super clear guys thank you very much well the next question comes from leonardo almost uh cell site analyst from ubs we are now opening the audio so that you can ask your question live or i can read it here i will read it hi good morning leonardo almost from ubs here one question from my end please discuss the expected evolution for the shift in revenue mix when do you expect the revenue to grow back again and what is the new normalized growth rate we should expect from zambia thank you and have a good day
spk06: I'll take this from the shift in the revenue mix and what we expect, and then you can complement on the expected numbers. So looking for the big strategy, the big picture of the strategy that we're doing here, we're seeing a SaaS business that's going into a healthy growth over these couple of quarters and expect 2023 to keep the same pace of healthy growth, which means sustainable, not focusing on growth that would be very costly to achieve, but growth that can be sustained over time with healthy rates. That flows to gross profit and then flows to beta as we understand that the whole market is affecting us and the whole tech industry to generate at some point. But now we're going into that direction. And the balance with CPaaS is the one that we look for how much we're able to achieve in terms of growth on CPaaS while considering cross profits, as Shai already mentioned. So we're seeing both businesses doing pretty well and we're seeing very high demand. We're seeing them getting back to growth. And especially when we look at cross-profit growth. So that's the way we're driving both businesses, both parts of the business into the numbers that we pick to drive in terms of what we expect looking 2023 and forward. So Shai or Kai would compliment on the numbers, the normalized growth.
spk05: So thanks.
spk04: So as we've been saying, and our guidance is detailed in this and there's a reason for that. Right. So we as we said, our CPS business, we expect it to be flat. And again, the reason is that for that specific business, we are not concerned with our top line growth as much as we are concerned with our gross profit and EBITDA and cash generation evolves. So we are looking more on the CPaaS business on a gross profit and EBITDA basis than revenue growth. But you should expect it to be flat if it goes well. And as we've seen improved, you can assume that low single digits could be done. But again, at this point, we would prefer to be on the safe side and wait to see if the competitive dynamics improve. And as for the SaaS business, we continue to see the SaaS business growing at around 30% a year. Q4 grew 40%, 44% on a pro forma basis. We continue to see a combination of net revenue expansion with clients being added. That's the normalized level you should expect for the different businesses. I don't know if Caio wants to add anything to that.
spk03: Sorry. Yes, Shai, of course. It's important to add here that we expect growth, although we see a flat in CEPAS revenue from 2022 to a full year view, we expect growth at the second half of the year. because of the first half of the 2022 was a strong half for CPAS in terms of revenue. And in the second half of 2022, we start to feel the stronger competition. We had a little bit reduction on our CPAS revenue. We expect the growth to come back in the second half of 2022. So that's important too. And they will make the year flat, but it's important to highlight that.
spk02: Well, 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 question aloud.
spk05: Eric, I'll take a question here.
spk04: Do you expect to have to raise debt or equity this year to give yourself more breathing room? We are working with several different alternatives to give us breathing room. and that on top of the earn-out renegotiations as we announced late last year. So the answer is yes, we've been discussing with banks possibility to extend maturity of the short-term debt that we have maturing this year and all other instruments and alternatives that are available to us and obviously We understand that there's still some funding gap and we will take all the measures and we expect to be a matter of weeks and not months to be able to come back and announce to the market that we are on the right track to solve our short term funding gap. There's a follow-up question on the same topic, which is cash flow for 2023. So if we assume 80 million reais in EBITDA at the mid of the range of the guidance that we provided of 70 to 90, so 80 million reais in EBITDA, We expect capex to be around 40, 45 million reais. So that's EBITDA minus capex close to 40, 35 million reais. And then we have approximately 40, 45 million reais in interest to be paid. So that gives you an idea of cash flow expectations for 2023. And that's why we see that there is still some funding gap that needs to be solved in the next 12 months. um another question here with a strong gross profit margin reaching over 55 percent why is the gross margin guidance for 23 almost unchanged year over year uh i'll let uh kayo answer this yes of course sure so we have two reasons here first is because of the fast business
spk03: we expect a little bit of reduction on margins because of the better allocation between costs and expenses for the acquired companies. So we did a really strong job on allocating better what is really cost and expenses. And when we are migrating some cost and expense, they'll reduce a bit of the margins when comparing to 2022 from the acquired companies because they are Paulo A. Smaller they don't have the accuracy that needed in terms of allocation so that's reason one reason two is also we. Paulo A. Do it to the market environment for CPI that we see in we expect me a little not keeping those margins for that we saw in the past, during the year we expect a little bit of reduction in order to guarantee the flat. number of revenue you saw between it and the growth that we expect in the second half of the year. So that's the main two reasons.
spk05: Thanks, Caio.
spk04: Eric, can you report to see if we have more questions?
spk02: Yes, 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 question aloud.
spk04: There's another one interesting here and I'll pass that to Cassio. Would you guys add in the reports rule of 40 for Zenvia? Cassio, I think it's interesting for you to discuss not only rule of 40, but all the SaaS metrics that we look at into our day-to-day decisions.
spk06: Yeah, sure. We love sales metrics and these are the ones that we apply internally to check the healthiness of the business and looking at specifically this concept of combining growth rate and profit margin as we're walking towards a path of interesting profitability. This exact number is going to have a very interesting balance in the next couple of quarters as we are forecasting around 10% of the margin. And from 2024, we are seeing, I mean, from the beginning of the year to the end of the year, we expect it to be a rising of this margin. We're seeing a very interesting balance of how we're able to manage this growth a rate with a bit of margins. We do have two different businesses, which means CPaaS has different logic comparing to SaaS, which makes a bit more difficult and tricky for us to disclose just for a portion of the business. So that's why we and the auditing team prefer not to explicitly declare. this kind of combined metric because it would become a bit more, I mean, tricky to report both CPaaS and SaaS, but we do use that for SaaS and it's doing pretty well in that sense.
spk05: Thanks, Cassio.
spk04: Next here, two questions on balance sheet. And first one, what contributes to the 120 million increase on trade payable year over year? Kyle, can, can you take that?
spk03: Yes, of course. So we trade payable. Uh, we have mainly the carriers, the carriers that we have, uh, they use our, that we use for CPAS for, for the, all the message that, uh, that we use, uh, in the CPAS mainly in the CPAS business. And also. The increase comes from the Tuilho agreement that we have because the volume of Tuilho that use our infrastructure here in Brazil, it's increasing. And so that makes our total payable to the carriers higher. So that's the main reason why this, this, this, this tribal payments higher when compared to the last year.
spk04: And just to add here for clarification, our agreement with Tuilio is for revenue anticipation, right? So Tuilio pays us three months in advance. So there is a positive working capital from this perspective because we get revenue from Tuilio ahead of our payment to the carriers. So it has been one of the tools we've been using to improve our working capital metrics. The second question on balance sheet is, can you explain how the liabilities from acquisition increases from 280 to 350 million sequentially? Shouldn't the payment negotiation with the one since they removed us reduce the liabilities instead of increasing it? Back to you, Kyle.
spk03: Felipe Cruz- Yes, no, so the payment, the total amount should not reduce because we renegotiated the the math of payment, not in one installment in several installments until 2026 by the overall. Felipe Cruz- Payment amount of payment kept the same. actually when we renegotiated especially move that we needed to recognize on our balance sheet there is now amount that was not recognized in the past year so that's why they increased but the overall uh amount that we should pay did not change so as expected so that's why they increased the only change that we had here was on how we would pay those those burnouts
spk04: um can you provide some color on your recent chat gpt integration is there strong demand from clients in general what you're most excited about ai integration at sameview that's for you cassio
spk06: Yes, as all of you have been checking on all the evolution of generative AI, we have been working with Microsoft and OpenAI to integrate this technology into our products. So we launched a couple weeks ago the first integration for creation of generation of campaign content. And we've been evolving into other fronts of how to use the generative content into the different processes of customer experiences. I would say we're seeing very interesting opportunities to help both sales reps or customer service agents using your tool to be more productive with chat GPT suggestions of next best answer and also analysis of ongoing customer interactions to get a better review of these interactions so you can then act on the best interest of the company and also of the customer. Also being working into different fronts to help customers into the different parts of our product usage. So being testing different opportunities to adopt ChatGPT into the whole UX or UI of our platform. So there are many fronts being worked on at this time, at this moment. So we expect next couple of weeks to release a more couple to our customers. Some of them are in beta with a few customers. So we're very excited because we're seeing that these technology It's really practical and can really be useful right on as our customers are using our different solutions. And we also see demand from companies to integrate JetGPT into their bots or automation journeys. Now, although we understand that it's a bit of... I would say lots of excitement. Some of these have to take into consideration that it's a bit early to let your brand be served by a fully automated bot. that sometimes can get out of control. I mean, you don't control the output 100%. That's why we're seeing that most applications would be either in a very controlled environment or to accelerate the operations for customer service agents or sales reps. And of course, all other kind of applications content-oriented process within customer experiences overall. So having said about some of these examples, we're looking at the big picture and it's very important evolution of the whole industry It's a whole CX industry being able to add this sort of tool in a very easy manner and becoming accessible for everybody. So there's lots of excitement and now we're making it work with our customers and it's doing pretty well in that sense.
spk02: So this concludes our question and answer session. I'd like to turn the conference back over to Mr. Cassio Bobson for his closing remarks.
spk06: Thank you very much for all that in this year. We're very happy to achieve during 2022 our guidance and some points even exceed our guidance. We're looking forward to 2023 to have a great year, a year where we are starting to benefit from all the acquisitions that we made in the last couple of years, now fully integrated, being able then to benefit from all the synergies. Our customers are very excited about all the opportunities we're being able to drive to them, not only on the AI side, but especially on the unification and integration of our solutions into becoming a very clearly unified CXS platform that will lead this whole evolution and transformation of the customer journey. So, it'll be a great year and thank you very much for the attention and for the time. I hope you'll see you on the next one.
spk02: The conference has now been concluded. ZenVSI, our area, is at your disposal to answer any additional questions. Thank you for attending today's presentation. You may now disconnect and have a nice day.
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