Zenvia Inc.

Good morning and thank you for standing by. Welcome to Zenvies Q2 2024 Earnings Conference Call. Today's speakers are Mr. Cassio Bobsin, Zenvies founder and CEO, and Shai Shor, CFO and Investor Relations Officer. Please be advised that today's conference is being recorded and a replay will be available on 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 we'll 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 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 our speakers for today, Mr. Cassio Bobsin, founder and CEO. Sir, the floor is yours.

Hello, everyone, and thank you for joining us at Zenvia's second quarter 2024 earnings call. I'm Kasia Babson, Founder and CEO. Thank you all for being with us today. Let me start by sharing with you that this quarter has been a significant one for us, as we have been laser-focused on rolling out our Zinti Customer Cloud solution, and I'm pleased to report that the response from our clients has been extremely positive, with healthy levels of recurring revenue, churn, and cross-adaption. We have also introduced in June our GenAI chatbot solution. This cutting-edge innovation delivers substantial value to our customers, as it is so simple that a chatbot can be built in just under six minutes. I'm happy to share that in these two months since its launch, about 100 companies across eight industries in Latin America built their chatbots. We are confident this number will keep increasing. Chatbots are evolving more and more and are expected to become the primary customer service channel for at least 25% of all global businesses by 2027, according to Gartner. This shift represents not just a simple automation, but a significant enhancement of the customer experience. Here at Sandia, our long-term vision is to revolutionize customer service and business processes automation with the smarter and more intuitive chatbots. We're leading this transformation in Latin America, offering fluid and personalized solutions that boost efficiency and enhance the customer's experience, and they're more profitable to us. In terms of next steps, additional features of our GNN AI chatbot will include real-time sentiment analysis, continuous learning from past interactions, and seamless integration with multiple systems. We're unlocking endless possibilities for the future of customer experience, all with the help of AI. These advances highlight the tremendous opportunities ahead and reinforce our commitment to driving growth and solidifying our leadership position in the market. The dedication of our team and the enthusiastic feedback from our clients attest our confidence in the transformative potential of these solutions. We're committed to continuing this momentum and exceeding expectations as we move forward. Now, I'll hand it over to Shai to cover our performance in the quarter.

Thank you, Cassio. Good morning, everyone. Let's start on slide five. Here's a snapshot of our performance in the second quarter and first half of 2024 compared to the same periods of last year. As you can see, we are happy to report solid numbers in both periods. The second quarter 2024 results came again in line with our expectations. combining strong revenue growth and strict expense control that resulted in an EBITDA of almost R$34 million in the quarter and R$57 million in the first half. When looking at the last 12 months, our EBITDA totals R$110 million, allowing us to reaffirm our R$120 million to R$140 million full-year guidance for 2024. Our revenues grew by 20% year-over-year in the second quarter of 2024, reaching R$231 million. This growth was matched by a 20% increase in adjusted gross profit for the same period, while our adjusted gross margin remained stable at 43.3%. This is right in the middle of our 2024 guidance range. Our EBITDA figures also showed significant strength, with both periods recording more than double the EBITDA compared to the same period of last year, attesting our continued operational efficiency and growth. Let's now dive deeper to understand these results. Both SaaS and CPaaS kept expanding by two digits in the second quarter and first half of 24, with the revenue increase driven mainly by large enterprise and bold segments. In the CPaaS business, the performance keeps reflecting our ability to grow while maintaining profitability at healthy levels, leveraging on better cost structure. CPaaS revenues grew 22% in the second quarter after growing 23% in the first quarter and 30% in the fourth quarter of last year. This attests to Zenvia quality and market leadership. Our SaaS business grew almost 16% in the second quarter compared to the same period of last year. The expansion came primarily from large enterprise customers, especially in the consulting business that has a low comparison base in Q2 2023. Looking ahead, we expect SMB clients to be the main growth driver of our new Zenvia Customer Cloud. When we look for the figures of the semester in the graph on the right of the slide, we see mostly the same picture, with growth variations that are very similar to the quarter numbers. Let's now take a better look on how this expansion has translated into a balanced and profitable portfolio mix. We continue to pursue and convert revenue opportunities in the CPaaS business. Particularly in the second quarter, we gained some volumes with unusually high margins from certain large enterprises, expanding CPaaS contributions to our revenue mix. The second quarter number shows SAS reaching 34% of net revenues and 42% of gross profit, while CPAS made 66% of net revenues and 58% of gross profit. In the same quarter last year, we had just a little bit more of SAS revenues, 35% versus 65% of CPAS, that translated into a 50-50 participation in the gross profit mix. As you know, a higher CPAS participation in the revenue mix impacts our margins. But I would highlight that the focus here was again on capturing volumes in CPAS that are converted directly to EBITDA, given that we do not need the initial GNA to generate that revenue. Here on slide 8, you can see exactly what I just explained. As our growth this quarter was mainly driven by large enterprises in both segments, and with a much higher CPAS participation, we were expecting some decrease in margins. We recorded almost 38% CPAS margins and 54% SAS margins in Q2-24. For the half year, the margin numbers were very similar. The lower SAS margins are related to the mix of large enterprises with lower margins. This decrease was totally offset by the higher than expected CPAS margins that we do not expect to be repeated going forward. The performance of both segments drove our consolidated margins. The adjusted gross margin remains stable when we compare the quarters. Worth noting here that we are reporting margins that are well within the guidance range, all according to our plan. And more important than looking at the margins as percentage, we highlighted gross profit expanded 20% year-over-year, or R$ 17 million, which is one of the drivers for our EBITDA more than doubling. The other driver for EBITDA expansion is our discipline on G&A execution, as you can see in the next slide. As I mentioned at the beginning of my remarks, we remain laser focused on keeping costs strictly under control. We have been growing the top line by double digits without adding additional GNA, which enabled us to more than double our EBITDA in both periods. In fact, we are doing this while bringing down our GNA as a result of increased productivity. This led the GNA's percentage of revenues to decrease to 14.4% in Q2 2024 from 19.4% in Q2 2023, representing a 500 basis points drop, the lowest level since our pre-IPO years, and a key factor positively impacting our EBITDA. When we compare the semesters, the drop was of 400 basis points, reaching 14.5% of revenues. Obviously, we are very happy with our EBITDA expansion we just discussed. But we cannot lose sight of how this EBITDA is converted into cash. So here we have a view of EBITDA minus CAPEX. In the first half of last year, when we deducted the CAPEX from our EBITDA, we still saw a negative figure. Small but negative. This year, we generated a positive R$ 24 million from the EBITDA- CAPEX. Also, if we consider the midpoint of our EBITDA guidance of R$ 130 million for the year and that our expected CAPEX should be around R$ 50 million, this index is projected to be positive at R$ 80 million for 2024. EBITDA- CAPEX is a crucial metric for assessing our ability to generate cash flow from our core operations after accounting for the necessary investment in the business. This matrix not only highlights our operational efficiency, but also helps understand how well we are positioning ourselves to leverage, fund future growth, maintain financial flexibility and reward shareholders. Since we expect that our EBITDA will increase at a faster pace than our CAPEX, as it has been the case for the last three years, we believe we will be able to start leveraging our balance sheet by H2 of 25. Until there, we are working to obtain more flexibility in our cash flow through new data or equity. On slide 11, we are reiterating our guidance for the full year 2024. Our revenue growth of 19% in the first half of the year is tracking at the high end of our 15% to 20% full year guidance. In terms of margins, we are forecasting gross margin in line with 23 figures between 42% and 45%, and our first half results of 42.7% track slightly above the midpoint of the range. And finally, in terms of EBITDA, our first half of the year came in line with our expectations, including the seasonally weak first quarter. Considering second half seasonality, especially Q4, we are confident in reiterating our EBITDA guidance of between 120 and 140 million reais. To wrap up, let's talk about the next steps that we have been discussing with our board. The conclusion of our liability management in the first quarter, which included both capital raise and debt refinance, was an important step to better align our cash flow from operations to the financial requirements we have. With greater financial flexibility, we can focus on executing our strategic planning, accelerating profitable growth and leveraging the balance sheet. As we roll out Zenvia Customer Cloud, that Cassio mentioned in his prepared remarks, we become even more confident that it will accelerate our organic growth. We are also preparing to expand organically outside Brazil, with a focus on Argentina and Mexico, where we already have operations and where we see high growth potential. Once again, we appreciate your continued trust as we move ahead. We are committed to building a profitable and exciting future for Zenvia, maximizing value to our shareholders. With this, we conclude our prepared remarks and ready to take your questions.