Zenvia Inc.

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, and 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'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 down no microphone at the end of your question. In this case, our operator will read your question aloud. Now I'd like to welcome one of our speakers for today, Mr. Cassio Bobsin, founder and CEO. Sir, the floor is yours.

Good morning, everyone. I'm Cássio Babson, founder and CEO. Thank you for joining us here today. I'd like to start by talking briefly about the AI revolution we are all witnessing. As we look around the world and in Brazil, it's clear that AI is no longer a promise. AI has become a strategic priority for companies looking to reinvent how they connect with customers. In global markets, we see AI driving everything from personalized product recommendations to proactive customer service. Brands are using AI to automate workflows, understand intent in real time, and scale human-like conversations across channels. In Brazil, this trend is also accelerating. Businesses of all sizes, from large banks and retailers to fast-growing startups, are all integrating AI into their CX strategies to improve efficiency, reduce response times, and deepen customer relationships. but customers today don't live in a single platform they move across whatsapp instagram on mail chat sms always expecting fluid personalized and consistent experiences at every touch point that is why ai isn't just a tool it's now a core pillar of how companies engage with their audiences and how they can sell more and serve better their customers And this is exactly where Zenvia's focus, empowering businesses to unify those interactions and bring intelligence, context, and skill to every conversation, no matter the channel. Let's see the next slides. This AI revolution marks the beginning of our new strategic cycle that we announced in January, as it builds on what we achieved in 2024 and sets the stage for more innovation, efficiency, and value creation moving forward. play a critical role in shaping the direction and growth of companies and allow us to adapt to market changes, focus our resources and position ourselves for long-term success. It is always worth remembering that Zenvia's mission since our inception over 20 years ago has always been to revolutionize the experience that customers have with companies and brands. We recognize three distinct strategic cycles so far in this mission. And we just closed the third one and launched the fourth one, as you can see in this slide. We had our first cycle, which was basically our startup phase after being born in a garage as an SMS provider. Then evolved to the second cycle, where we expanded our messaging capabilities and consolidated ourselves as the leading SMS broker in Brazil with a series of acquisitions. The third and latest strategic cycle began in 2018 when we decided to evolve from a leading Brazilian CPaaS to become the most comprehensive CX SaaS in Latin America. After a series of acquisitions held before and after our IPO of companies that not only complemented our CPaaS business, but also reinforced our strategy and vision for the future, all overcoming challenges in their integration, we officially launched the Zenfit Customer Cloud in 2024. Zenvia Customer Cloud is the culmination of this vision and is now our core business moving forward. So as of January 2025, we have entered our fourth strategic cycle centered on accelerating the growth of our newly defined core business. Let's dive in on Zenvia Customer Cloud on the next slide. We're truly excited about Zenvia Customer Cloud and the immense potential it brings to our company. This platform represents a pivotal milestone in our journey and in our commitment to enhancing customer experiences. Zinvi Customer Cloud is powered by AI-driven solutions and robust data analytics and is designed to adapt simply to businesses of all sizes and across diverse industries. Clients already using it report enhanced customer engagement, increased sales, and reduced costs. Zympia Customer Cloud was born with AI at its core to help companies not only automate but truly operationalize intelligence, especially when managing the experience of thousands of customers in a single unified environment. It is important to highlight here that the launch of Zenfec Customer Cloud was leveraged by two important and strategic initiatives, the use of product-led growth PLG strategies and our international expansion in Latin America. Our PLG strategies give users flexible and self-service access to our software. They can start small, explore features at their own pace, and scale in an easy way as their needs grow. This is all made possible by integrating our services into this unified platform, which makes the experience intuitive and adaptable for businesses of any industry and size. Because it fits so well with what our clients need, it leads to higher adoption, stronger long-term relationships, and a scalable revenue model, positioning Zenvia for sustainable growth in a fast-moving market. Another key differentiator is our shift to a volume-based pricing model. where clients pay based on the number of interactions they have with their clients and prospects, rather than the traditional perceived SaaS model that we had before. This approach is enabled by an extensive use of AI in our software, which minimizes our customers' reliance on human agents, enhances efficiency for their operations, and unlocks greater revenue generation potential for us with much less complexity. And our international expansion, particularly in Argentina and Mexico, where we already had a presence, is performing well and delivering results. These international clients are already delivering a solid contribution to the success of the customer cloud. further validating our strategy. The initial results we already achieved with Xavier Customer Cloud in these first months leaves us energized and optimistic about the opportunities that lie ahead after this challenging 2024. As we enter this important new strategic cycle, we are laser focused on driving organic growth by leveraging our unified platform and market opportunities, evolving and accelerating our partnership ecosystem boosting profitability through smarter operations and efficiency, while reducing leverage to strengthen our foundation foundation. At the same time, we're committed to building the optimal capital structure to support our ambitions and ensure long term resilience. These combined efforts are expected to position us to unlock meaningful, sustainable value as we move forward in our journey. I'll now hand the call over to Shai to present our foundation performance, and I'll be available for the Q&A session later on.

Thank you, Cássio. Good morning, everyone. Let's start on the next slide and continue talking about Xavier Customer Cloud, as Cássio just mentioned. This slide brings a snapshot of Xavier Customer Cloud, which was officially launched back in October 24 and generated revenues of around R$ 180 million in the full year of 24. We closed the year with almost 6,000 companies already using the platform, 20% of which were international companies, mainly from Mexico and Argentina. In terms of growth, we estimate that this operation will expand by 25% to 30% in 2025, achieving a gross margin of between 68% and 70% and positive EBITDA margin. Our estimates are based on solid data showing the market is set to keep growing at a strong double-digit pace in the coming years. On top of that, our new unified operating model with advanced automation and AI and the acceleration of our partner ecosystem puts us in a better position to make the most of these opportunities. Let's now move to the next slide and talk the numbers from the quarter and the year. Q4 was a particularly challenging quarter for us as several headwinds converged and weighed on profitability despite continued top-line growth and disciplined cost management. Starting on the left, we can see revenues reaching R$231 million, up 7% year-over-year. This was primarily driven by a strong volume growth in CPS, which offset declines in SaaS revenues. However, as we move to the next chart, we can see the pressure on margins. Our adjusted gross profit declined 60% to R$49 million, with gross margin decreasing to 21%. There were two main drivers behind this. First, on the CPS side, we saw a higher mix in the quarter coming from strong growth, but at lower margins. This was further impacted by a R$27.8 million SMS cost adjustment related to the full year, but only recognized entirely in Q4, rather than being spread across previous quarters. As you can see in the center chart, this had a major effect on our CPAS gross profit and margin. If we exclude this one-time item, CPaaS adjusted gross margins have been close to 22%, which is much more in line with our expected range of 20% to 25%, as opposed to the reported 4%. We view this impact as a non-recurring and expect margins to normalize progressively over the course of 2025 as we move on with our strategy. Second, in SaaS, margins declined to tire profitability from our enterprise clients, who continue to operate in a highly competitive environment. Additionally, we incurred higher costs related to the launch of Zendure Customer Cloud. As we continue rolling out this new operation, we expect to see better results from our SaaS segment throughout 2025. As a result of both these effects, CPaaS adjusted gross profit was only R$6 million, while SaaS reached R$43 million, with margin decline in both segments. EBITDA, when excluding earn-out expenses and the SMS impact I just mentioned, closed the quarter at R$35 million, a 6% decline versus the R$37 million recorded in Q4 of 2023. We expect this level to be our recurring quarterly EBITDA going into 2025. Let's now move to the analysis of the results of the year. In this slide, we show our annual revenue and non-GAAP adjusted gross profit over the last three years. On the revenue side on the left, both segments presented growth in the periods. The CPS market proved to be much more dynamic and volatile than expected, expanding 25% year-over-year between 2023 and 2024, after growing only 3% in the previous year. while SaaS remained in a highly competitive environment, growing at high single digits in the same period as compared to double digits the year before. But this revenue performance, along with the margin impacts we just discussed, particularly from Q4, drove the overall gross margin compression in the year, as seen on the chart on the right. Looking ahead, I would like to emphasize again here that we have been investing a lot on the integration of the SaaS solution, and we expect to start to leverage on the growth of SaaS under Zendure Customer Cloud. As we move more and more into it, integrating all businesses into the new business model, the company is increasingly transitioning into a full size model, generating MRR through monthly subscription, seats and usage volume. Let's now look into the profitability for the year in more detail. This slide gives us a consolidated view on how gross profit and margin performed in 24. Again, profitability was impacted by the newly acquired CPaaS clients with lower margins and the competitive environment for enterprise on SaaS, along with the cost adjustment we just discussed. I would like to highlight here that despite the impact this quarter, we believe this strategy with the newly acquired CPaaS clients will pay off over the medium to long term as we deepen this relationship and we don't need additional G&A expenses to manage them. Moving on, let's now discuss our G&A. Over the past two years, we've stayed laser-focused on tightly controlling costs, cutting R$33 million in G&A expenses in total, thanks to our streamlining efforts that started at the end of 2022, when our G&A to revenue ratio reached almost 23%. As you can see in this slide, this ratio went down to 12% in 2024, from 16% in 2023, and from 19.5% in 2022, down by 760 basis points in this two-year period. We are very proud to have been able to pivot the company this way, improving both the productivity and profitability, which are vital for this next phase of growth, as Cassio mentioned in his opening remarks. As we enter 2025, we remain committed to keeping our focus on streamlining our operations to drive efficiency. We announced in January a headcount reduction projected to generate cost savings of an additional R$ 30 to R$ 35 million in 2025, even after accounting for severance expenses. And we are also counting on AI and automation to have an even deeper impact in streamlining efforts moving forward. As a result of all our efforts on both the revenue side and G&A side, EBITDA multiplied by almost five times in these two years, but fell short of the full year 24 guidance for the reason I already explained. Even though our revenues went up 19% year over year to 960 million reais and the G&A expenses went down 11% year over year, it was not enough to offset the lower gross profit margins. We were frustrated that we couldn't reach our EBITDA guidance for 24, but at the same time we were confident about 25, given the early improvements we had already seen in the first months of the year. Moving on to the next slide, another key index that we always like to highlight is our EBITDA minus topics. This metric not only highlights our operational efficiency, but also helps you understand how well we are positioning ourselves to leverage, fund future growth, maintain financial flexibility, and reward shareholders. As you can see in this slide, in 2022, when we deducted the CAPEX from our EBITDA, we still saw a negative figure. It turned positive in 2023 and improved even more in 2024, even considering the increase in CAPEX related to the investments in data center this year. When we look year over year, our EBITDA minus CAPEX improved R$26 million in 2024, but for the two years the performance is even better, an improvement of R$53 million. We also ended the year with a cash balance of 117 million reais. We expect EBITDA to continue growing at a faster pace than our CAPEX, as it has been the case for the last few years. CAPEX for 2025 should remain in the same level of 2024. Zendia Customer Cloud is the growth engine for our company from now on. Moving on to the next slide to talk about our next steps. As we move into this next phase, our focus remains clear. will continue to accelerate organic growth, supported by the increasing scalability of our new platform. At the same time, we are streamlining operations even further, with AI playing a key role, not just in how we serve clients, but in how we operate internally with greater efficiency and intelligence. As a means to sharpen our focus on our core business and drive the expansion of our ecosystem, we'll carefully evaluate opportunities to divest on core assets as we disclose in January. We believe we own assets that hold significant value in their segments and an opportunistic investment could play a key role in optimizing our capital structure. As we embark on our new strategic cycle, we are focused on expanding Zendia Customer Cloud in Brazil and Latin America. Our priorities are accelerating organic growth while continuing to leverage the company. We are working hard for these actions to result in a more efficient company with exceptionally solid business metrics, enabling us to unlock value to our shareholders. I couldn't close this call without thanking you all for your support in 24, which, as I said in the beginning of my prepared remarks, was a transformative year for us. We appreciate your continued trust as we move ahead. We are committed to building a profitable and exciting future for Zendure. Based on what we have seen so far, we expect to report a good start for the year with Q1 numbers by mid-June. We cannot anticipate specific numbers at this point, but I can say that we are seeing revenue growth picking up, SaaS margin recovery, and EBITDA tracking at healthy levels. With this, we conclude our prepared remarks and we are ready to take your questions.