Zenvia Inc.

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 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 down no microphone at the end of a question. In this case, our operator will read your question aloud. Now, I would like to welcome Shai Shor. Sir, the floor is yours.

Good morning, everyone. Thank you for being with us here today to discuss Sandia's first quarter 2025 results. I am Shai Chor, CFO and IRO. Let's start with a snapshot of the Q1 2025 performance, where you can see all the main financial KPIs of the period. As you can see, in the first quarter we recorded strong top line growth of 39%, reaching almost R$300 million, mainly driven by CPaaS. On the profitability side, we continue to experience margin pressure in the CPS business and some temporary impacts on the SaaS business as we ramp up our Xavier Customer Cloud solution. Therefore, our consolidated adjusted gross profit declined 21% to R$74 million from R$94 million a year ago, with gross margin decreasing to 25%. There were two main drivers behind this. First, on the CPS side. We saw another quarter with higher CPS mix due to strong volume growth with lower margins, combined with an increase in SMS costs applied by the carriers in January, which is expected to be passed through prices throughout the year. Second, on the SaaS side, while adjusted gross profit remains stable year over year, the margins were impacted by the transition to Zendure Customer Cloud as we're still ramping up the business. I'll talk more about this later on. This drop in adjusted gross profit was partially offset by a R$7.5 million decrease in G&A, which represented 8% of our revenues in the quarter, practically half of what it represented a year ago. As a result, normalized EBITDA totaled R$20 million in the quarter, in line with our expectation, and is expected to increase progressively over the course of the year. It is important to highlight that we incurred approximately R$8 million in 1x7 costs during Q1, related to the workforce reduction as announced on January 13. Let's take a deeper look at these results. In this slide, you can see the breakdown of our revenues between SaaS and CPaaS. The revenue increase in this quarter came mainly from CPaaS, which remains very dynamic and volatile, and went up 58%, making up 73% of our total revenues. The CPaaS revenue growth came mostly from certain customers that currently have tight margins. We are confident that the strategy of acquiring clients at tighter margins will pay off in the middle and long term, as we do not need additional G&A expenses to manage them. In the SaaS business, revenue went up 5% year over year, mainly driven by higher revenues from SMB customers, an encouraging sign given that it is the target audience of Xavier Customer Cloud. The SaaS business represented 25% of our revenues in the quarter. This higher mix of CPaaS with low margins still impacts our gross margins. Let's move to the next slide to discuss our profitability. This slide gives us a comprehensive view on how gross profit and margin performed in the quarter. The first chart on the left shows the SaaS business. Adjusted gross profit was flat year-over-year at R$43 million in Q1-25, while adjusted gross margin from SaaS went down 2.7 percentage points to 54%. Even though SMB customers have higher margins than the average mix, we saw a decrease in the SaaS adjusted gross margins primarily due to the transition to Zenvia Customer Cloud as the business is still in its ramp up phase. We expect to keep scaling over the next quarter and improve profitability. It is worth noting here that revenues from Zenvia Customer Cloud solutions increased 15% year over year and are expected to increase even more as we ramp up the business. In the middle of the slide, we can see the CPaaS performance that was again impacted by the newly acquired CPaaS clients with lower margins and increased from the carriers that I already mentioned. As a result, our consolidated adjusted gross profit totaled R$74 million in Q1 2025 with an adjusted gross margin of 25%. Moving on, let's now discuss our G&A. Our G&A expenses this quarter went down 24% year-over-year, reaching R$24 million, already including around R$8 million in severance costs incurred in Q125, as I mentioned earlier in this presentation. This brings G&A as a percentage of revenues to 8%, down 6.7 percentage points from the 14.7% reported in the same period of 24%. This is due to the workforce reduction of approximately 15% announced in January that is expected to result in cost savings between 30 and 35 million reais in 2025, already factoring in the severance expenses. Moving on to the next slide, another key index that we have been highlighting in our presentation for a couple of quarters now, EBITDA minus CAPEX, recorded a positive 10 million reais inflow in the quarter. When we look year over year, This metric remained mostly stable, and we also ended the quarter with a cash balance of 86 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 quarters. CAPEX for 2025 should remain in the same level of 2024. Moving on to the next slide to talk about our next steps. although they've been very consistent for the last couple of quarters it's always important to remind you what we've been doing at one of the next steps as we embark on our new strategic cycle we are focused on expanding the customer cloud in brazil and latin america we are focused on accelerating organic growth leveraging our scalable new platform and partner ecosystem while maintaining our commitment to the leveraging the company The rollout of the new strategic cycle announced in January is taking a toll on short-term profitability, but we are steadily advancing efforts to boost our medium and long-term performance. 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 we disclose in January, we will carefully evaluate opportunities to invest on core assets. We believe we own assets that hold significant value in their segments and an opportunistic divestment could play a role in optimizing our capital structure. 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. With this, we conclude our prepared remarks and we are ready to take your questions.

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'll 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 an operator will read your question aloud.

Let me take a first question here in the webcast. Could you talk on some more of the reasons behind the CPS growth in terms of SMS volume? Do you think there is an AI tailwind here with companies spending a lot more on campaigns now, or is this a temporary short-term trend? Cassio, do you want to talk about the trends on the SMS and if there is anything AI related to this?

Yeah, sure. There is some seasonality in terms of SMS volumes. due to marketing campaigns that are relying on SMS as its main channel. We understand that this is keeping a strong pace in the last couple of quarters and still giving us a bit of a tailwind on the next couple of quarters as well. And so it's not related to AI itself, but mostly to marketing campaigns that are being resulting in these volume increases in the last couple of months. And I think we do have a second question, right, Chef, from the same RME.

Yeah, let me just add before we go to the second question on trends. Q1 was actually pretty strong following what we saw in Q4 and actually the entire second half of last year. When we look into Q2, we see it somewhat softening, although continue to be very strong and we continue to see SMS volumes growing year over year above two digits, high two digits. So it's not as strong as it grew in Q1, but continues to be with a strong growth in Q2 in terms of volumes. Now, going to the second question, any more color on Zenvia Customer Cloud would be helpful to understand how the 15% year-over-year growth for Customer Cloud is being calculated, given that Customer Cloud only launched in Q4. And does the 15% growth change the 180-200 million BRL guide for the year, given that it's lower than a 25-30% productive growth? So let me start here, and Cassio, feel free to add on anything here. When we talk about Zenvia Customer Cloud, we always include what is native Zenvia Customer Cloud, meaning new clients since we launched in October coming in directly into Zenvia Customer Cloud, but also the former businesses that are being migrated and clients that are being migrated to Zenvec Customer Cloud. So just to put into perspective, when we say about a 15% growth year over year, it includes new clients in directly in Zenvec Customer Cloud, but also we compare the growth overall of the, what we call the Zenvec Customer Cloud Plus, which includes the clients being migrated. Second, obviously, that we believe that as we ramp up and people get to know more and more Xavier Customer Cloud, this will be accelerated. And therefore we continue confident that this business will grow 25 to 30% in full year 25. There's another question here in the webcast. What are the current headwinds for the faster adaptation for Xenvia Customer Cloud? Are the headwinds associated with the current high interest rates or customer cautious to migrate to Xenvia Customer Cloud? Cassio, do you want to take us on the challenges that we see on the first months of Xenvia Customer Cloud?

Sure. We're seeing strong adoption for new customers that are coming. Zemi Customer Cloud in terms of migration. We're being cautious when migrating customers because we want them to experience a very interesting improvement on their current solution. So we're taking time to get them by hand and having them understand what are the package that they are being deployed to them as this new solution gives them lots of different opportunities to adopt as in the customer cloud. So I would say that we're being cautious to get these customers to have a good experience, to stay on the platform, to evolve their usage. So, it's not about the customer being cautious, it's more about us being cautious to bring them an awesome experience when migrating.

Thank you, Castil. Another one here. Could you please provide some color on asset sale progress? How is the earn-out payments going and more color on the leverage? So, obviously, we cannot... as was the case with the previous earnings poll, we cannot comment specifically on asset sale. As we keep highlighting, this is something opportunistic and we'll continue to evaluating opportunities if and when they arise. All the rest, so in terms of capital structure and already taking the next question here and putting them together, we continue to seek a way to leverage balance sheet faster and improve our capital structure. This is important not only obviously from a pure financial reason and with high interest rates, The leveraging is even more important, but also because we believe that we could accelerate our growth if we had a better capital structure compared to our EBITDA. So it's a It's not a one-way progress or a one alternative progress. It will have to come from liability management as we've been doing. And we did again in the first half of this year when we renegotiated with some banks grace period on loans amortization. and also sales of non-core assets if it's the case. So it's a combined effort. As you can see also, we've been streamlining operation and reducing GNA expenses to accelerate EBITDA. So all of the usual tools and combination that we have to deliver balance sheet. Hugo, can you report there are no further questions at this moment in the webcast?

Sure, Shaya. 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.

There's one more here. Can you provide us with guidance for the year, or at least tell us how the trends are looking? So the same way that we did in Q4, it's been a very volatile year, especially on the CPAS side. And there are some ramp ups on the Zynga Customer Cloud side. So we decided to give a, not to give a formal guidance for the year, but discuss a short term trend. So as I mentioned in the first question, when we look into Q2, the SMS business, the CPS business continues to be strong, although slightly decelerating compared to what was Q1. And we continue to expect Xenvia Customer Cloud and SaaS to continue growing the same trend that we saw in Q1 with some acceleration on Xenvia Customer Cloud side. EBITDA reported was 20 million reais in Q1, but as we mentioned in our earnings release, there was an 8 million reais one-time expense related to severance cost, as we discussed on January 13, the reduction on our workforce. And so if we consider around closer to between 25 and 30 million reais in recurring EBITDA in Q1, this is more what it should look like in Q2. And then second half is usually stronger because of seasonality. So these are the trends on a quarterly basis that we are looking at. There are no, oh, there's one more question here. Cassio, how Xenvia Customer Cloud is different from the solutions offered by competitors?

Okay, so usually companies that are using software for their customer experience, they tend to have a very fragmented ecosystem of providers, which means they use one software for marketing campaigns, another for sales, another one for customer support, and some other solution for customer engagement, and sometimes a different provider for automation, chatbots, and AI. What we were able to do at Xavier Customer Cloud is to unify all of those processes and solutions into the same software. meaning that it's in the same interface, same logging, same contract and business model, sharing customer data among all these different perspectives or processes, which in practical terms means that you can do a marketing campaign or sales process or serve your customer, serve their tickets or demands. having all the data from the customer within the same place, so you can see the whole context of the customer. All of these shares the same database, which means every time you interact with a customer, you have the data being available for the whole customer journey. and what we're doing right now on the customer cloud is to we're building we're allowing customers to build agents and also providing some agents that automate some of these operations such as identifying with the best customers or helping to understand what is the customer context for some support And all these is able to be developed and provided because we are a unified solution. And that's not something you can easily make with this fragmented ecosystem. So majority of small and medium customers have no other way to make that happen. That's why they're seeing a huge benefit from the customer cloud. And they have a large customers that we didn't necessarily expect. to adopt Xavier Customer Cloud as their solution are beginning to use our software. We have huge banks and retailers using Xavier Customer Cloud as their solution. And that's something we're seeing that there's a really very good opportunity for us as a wide space that we'll be able to fill. So that's why we are very excited about this solution being somewhat unique to the market.

A follow up on this. Can you talk a little about clients who have been using Customer Cloud for longest? What do trends look like? How do they mature usage? Just give us some, Cássio, some view on use cases and what's been going on in the Customer Cloud from a client perspective.

CÁSSIO PEREIRA- Sure. We're still early on the cohorts, but we're able to see the behavior of these customers easily adopting new modules by themselves. Before Xenia Cosmic Cloud, we provided our solutions as a standalone, each solution as a standalone offering. And we measured cross-sell of these solutions. And it was very difficult to sell a second software As every time a customer would consider adopting a new software, we would compete with any other provider that were able to provide a niche solution. But as we provide Zenvix Cloud, all this software embedded, they're a click away from current customers to try to experiment these new solution, which means they're, let's say they're doing marketing campaigns. If they want to engage with customers and make a sale, That's just a mini menu item. They just click and they start interacting with these customers. If they want to create to provide a ticket control for a customer support, they just click and they're able to test. So this is creating a huge effect of cross-adoption that it is around, I would say, 15 times what we had before in terms of cross-adoption that we compared earlier to cross-sell. And that is getting a very good traction for customers. Every new customer that start with one module over time, they easily go to a second or to a third module. And that is happening throughout the customer base. And the business model that we created is able to monetize that as we charge per interactions with end customers. It's kind of a volume usage model. we are able to monetize that. So we see these cohorts growing usage and then upselling their plans as they continuously use all these new adaptive solutions. So that's the trend that we're seeing. And the kind of customer that are using these is very broad, but it's fair to say, that we see health, education, retail, and financial services are being like the ones that benefit the most of the solution. And we thought it would be mostly for medium-sized companies, but we're also seeing large companies adopting the software. So that's kind of a an unexpected trend for us that we're seeing occur in the last couple of months. So that's pretty much what we're seeing nowadays.

Another one for you, Cassio. Would love if you guys can provide more color into the new franchise model. How is it going? And expansion into other countries in Latin America. How big is this an opportunity?

Sure. Just starting on LATAM, when we look at the customer cloud, we have around, correct me if I'm wrong, but around 40% of our revenues from ZCC Plus already coming from ZCC. countries other than Brazil and mostly are from LATAM. So we see it's a very competitive solution that we're providing for the whole of LATAM. That's why we are investing to grow and we're already seeing growth for LATAM as well. In terms of the franchise model, we launched DAD. that model on Q1, beginning Q1, with zero partners, and we have more than 30 franchises already contracted, already working with us. It was our goal for the year, but we were able to achieve that on the first half of the year. Now we're working with them and training and helping them on their first customers, and that is doing pretty well. That's why we are very excited with this new model. We understand that throughout the year, as these new partners, they mature, we will be able to see an important part of our growth from Xavier Customer Cloud coming from this model. And let's see what happens for all the years. We're able to see the amount of growth and the amount of leverage that will bring us. But it's been interesting, very interesting so far.

And Kasson, just to add on the Latam side. So it's been, we've been putting more focus on that. We have a team based out of Mexico and it's been a, as Cassio mentioned, competitive, but we see opportunities. We estimate around 50 million reais in revenues coming from ATAM in 2025. So it's more than 50% growth when we compare to 2024. So it's a strong improvement, strong growth. Obviously, opportunity is way bigger than this, But it also, as I mentioned, there's a lot of growth that depends on our ability to deliver the balance sheet and be able to accelerate growth. But despite that, we are very happy with what we're seeing in our LATAM expansion as we put focus on it. And it's one of the specific goals that we have for 2025. Can you please address the issue of customer churn? Is this a result of your business transition? What are you doing currently to retain customers?

Cassio. Sure. As we have some solutions that we consider legacy solutions, we expect that we have a bit of churn that is higher on this legacy software than on the core software. When we look at the core software, which means ZCC and the ones that are going to be migrated to ZCC, There we don't see a huge problem in terms of churn that has been healthy. Of course, we're always working to get a better retention of these customers. Usually what we have in terms of churn for this portion of the business is more early churn. And these tends to be customers that try and at some point they understand it's not the best solution for them. But when we see the base churn, that is pretty low. When we compare to benchmarks, we're very healthy in terms of churn for the base of customers. So it's a mix of different portions of churn. We're diversified in the churn level, considering all these aspects. But of course, we're always working to get not only a better rotation, but also a better development of customers that stay on the base. And we're able to do that with the cross-adoption and the volume usage business model.

Thank you. Thank you, Cassio. I'm not seeing any further question here. Hugo, can you repo?

Again, if you have a question, please use the Q&A icon at the bottom of the 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 a question and our operator will read your question aloud.

I guess that's it from Q&A side, Hugo.

Okay. This concludes our Q&A session. I would like to turn the conference back over to Mr. Cassio Bobsin for his closing remarks.

Thank you very much for everyone's attention. We are very happy to share with you the results of Q1 and we're seeing a very interesting year for us. It's a year of getting profitability and growth combined. We're seeing the beginning of the year giving good trends for the whole of 2025. So expect to see you in the next quarter.

The conference has now concluded. Zenvia's IR 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.