Neogrid Participações S.A. (NGRD3) Earnings Call Transcript & Summary

Good morning, everyone. Welcome to Neogrid's Q3 '25 Earnings Call. I have here with me, Nicolas Simone, our CEO; and Augusto Vilela, CFO and Investor Relations Director. I inform that this presentation is being recorded and comes on simultaneous translation. [Operator Instructions] Before we start, I would like to highlight that possible statements and forecasts reflect the administration's expectations and are subject to risks and uncertainties. After the presentation, we will open for Q&A, and the recording will be available in the IR website of Neogrid. Now I'll give the floor to Nicolas. Good morning, Nicolas.

Good morning, everyone. I'm very happy to be here sharing the results of the first quarter of Neogrid. In our last results call, we highlighted an accelerated transaction of the company. Ever since we have advanced very much in several fronts. So I would like to highlight some of these advancements. First, like I mentioned before, Neogrid had stopped prioritizing the international market, but we have a relationship with relevant clients and a very good sound expertise outside Brazil. So since June, we recovered our go-to-market agenda abroad, and we have registered new important sales in Colombia and Peru, close to large clients with whom we have reinforced our relationships. Second, we have expanded our business in Brazil. In addition to the CPG and Electro segments, we are also advancing into new verticals, especially pet and house and construction that have been proving to be very promising. Third, we have accelerated our efficiency agenda. We have overcome the initial target of cost reduction, and we have reached a result of BRL 9.4 million, the best standards ever since 2023. Augusto is going to explain this performance later on. Also, we anticipated the cost of the companies of the acquired companies over the past year. This has accelerated the integration of the offers and products and allowed us to have more operational efficiency and synergy between the teams. Another important point is that we have reviewed new business models and a good example is EDI Mercantil. That is a solution that started to operate in a model that delivers more value to the company and stimulates more users within the Neogrid ecosystem. So this is one of the opportunities that we see in other products of our ecosystem. And finally, we anticipated the renegotiation of a contract of cloud computing that is going to reap very good gains and will accelerate technological developments in our platform. These expressive efficiency gains, we will see in 2025, and we will also reflect on 2026. Summarizing, we are building a Neogrid that's leaner and more agile. Currently, we have the smallest number of collaborators since 2022. And at the same time, we are getting closer to our clients, adding value and strengthening our commercial relationships. In the next slide, I'll highlight a little bit an important step of our organizational restructuring. We started the year with 5 business units, one in June and in October. We reaped, of course, a simpler structure that is more effective with a complete management of the relationship with the clients and generating demand. This allows us to have more focus, more -- to be closer to our customers and for sure, to work in a more precise dimension to add value. This change brought us more agility, more efficiency and a more integrated vision of the business. We have also improved governance in multiple points of contact that we have in our clients, something that is fundamental to support us in our business. In addition, we have unified the financial and commercial performance and governance areas in one single structure. This consolidation reinforces our internal governance and allows us to be -- have a more encompassing approach into the business with more control and more synergies. This allows us to grow with efficiency, speed and discipline, maintaining a focus in value management for the customer and for the shareholders. Finally, I would like to share in the next slide, our future vision. While we work in an intense way in this transition of standards in terms of results, we are also designing what we believe to be a model that Neogrid can -- in which Neogrid can add more value, both for our ecosystem and our shareholders. We have adopted a bimodal approach, facing the challenges and taking advantage of the opportunities, accelerating efficiency and execution. On the other hand, we are preparing the next step of the company that will start including the offer of the first autonomous supply chain solution to our clients. This action goes from our data fabric, which is the biggest and the most complete in the supply chain in Brazil. So our integrated portfolio that covers all the journey of industries, retail and distributors. By integrating our products and offers, we are extracting synergies and building the basis for an intelligent automation of all the supply chain. NIA, our proprietary artificial intelligence is part of this. It will connect data recommendations and soon will allow us to create autonomous AI agents dedicated to critical processes, positioning Neogrid as a truly autonomous company that is able to orchestrate the supply chain in an intelligent, continuous and collaborative way. This strategy has been guiding our actions and inspire our purpose, which is to help our clients, sell more with bigger margins by using data and applied intelligence. With that, I wrap up my first part of the presentation, and I give the floor for Augusto to follow.

Thank you, Nicolas. Good morning, everybody. I would like to open talking about our MRR that has been kept virtually stable since 2025. But compared to September 2025 -- 2024, we had a growth in CPG and Electro in Brazil. In the additional segments, we still see a small retraction due to the market in the recent years. And it's important to highlight, like Nicolas mentioned in the beginning of the presentation that we are expanding our business focus to other sectors in addition to CPG and Electro, and we started to prospect new clients abroad again, and we already have some contracts signed. Another factor that I would like to highlight is that we are reviewing some commercial models of some of our products as EDI Mercantil. So this will add to our recurring revenues. Internally, we have observed great improvement in our commercial chain, which will translate in future revenues as we advance in the cycle of implementation of our products. Finally, it's important to mention that we have been saying since our last call due to deprioritization of the international market, we did not renew contracts in approximately BRL 1.1 million per month as shown in the -- on the slide. Advancing to the next slide. In line with the MRR indicator, I would like to present our net revenue that closed in BRL 67.9 billion in Q3 in 2025 and BRL 205.8 million in the accumulated, which is a retraction of 1.1% compared to Q3 2024, but a growth of 19.7% in year-to-date. In addition, our recurring revenues was registered in 97.6% in the total revenues in Q3 of '25 and 97.8% in year-to-date, showing the recurring revenues on our revenues. The reduction of the services revenue is connected to our commercial approach that is privileging more and more recurring revenues and long-term contracts as well as consumer revenues. The revenues based on the use of our products. Going to Slide 10, we analyze here the composition of our revenue. We observed that the portion originated from our international operations represented 9.9% of total revenue in the accumulated view and has remained stable compared to the same period of 2024. In this period, this movement was mainly due to the positive exchange rate appreciation of 2.7% in the quarter and 18% in the accumulated 9 months. In the graph on the right, we present the revenue with the recent consolidation of Neogrid's business units, but also the integration and retail execution unified in the supply chain structure. In this context, we show that the supply chain unit represents 56.7% of our revenues of the first 9 months of this year, an evolution of 3 percentage points in this activity compared to the previous year. And while the collaborative unit represents 43.3% of Neogrid's total revenue in the same period. Going to the next slide, we show an opening of gross margins per business unit showing the efficiency of each operation, like I showed in the previous slide. In general, Neogrid's gross margin reached 58.6% in the first 9 months of '25, practically in line with the same period of last year with the collaborative intelligence business unit presenting a gross margin of 51.7% and the supply chain business unit presenting 62.8%. In the quarter review, the gross margin improved 4.3 percentage points compared to Q3 '24, mainly due to the lower personnel costs and compared to the previous year. Going to the next slide. The additional expenses represented a significant reduction, representing 47.3% of net revenue in the third quarter of '25 compared to 63% in Q3 of '24. In 2024, it represented the period, the revenues went to 54.3% in '25. The main impacts are in expenses with sales and G&A, general and administrative expenses. They represented a reduction of 7.2 percentage points and 4.6 percentage points in G&A. In G&A, the effects are mainly due to the improvement with personnel expenses, which accompanied the reduction in the number of employees that we agreed. In the sales expenses, we had an important reduction compared to the previous year with the reduction of our Neogrid Summit. We had a more executive approach this year, and it promoted a lot of engagement. It also had a format with a lower cost and counted on a big contribution as sponsors for the event. When we consider the operating expenses that were capitalized as CapEx. This reduction becomes even more evident. The ratio between expenses and revenue decreased in all the fronts, reaching a reduction of 22.8 percentage points in relation to the revenue compared to Q3 2024. On Slide 13, we show the evolution of our adjusted EBITDA. As a consequence of the significant reduction that we had in operating expenses that I have just presented in the last slide, we had a recovery of our adjusted EBITDA that went to BRL 4.1 million negative in Q3 2024 to BRL 9.4 million positive in Q3 2025, which is the best performance since 2023. This led us to the adjusted EBITDA margin of 13.8% in the third quarter of '25, an improvement of 20 percentage points compared to Q3 '24. In the accumulated view, the adjusted EBITDA recorded was BRL 9.3 million with a margin of 4.5%, strongly impacted by the result of this quarter. The performance of the adjusted EBITDA demonstrate Neogrid's ability to generate recurring operating results and the success of our efficiency initiatives. I would like to highlight that the main adjustment to EBITDA is related to not considering the positive effect of the reversal of liabilities related to obligations from investment acquisitions, mainly due to the anticipation of earn-out clauses of acquired companies. This was around BRL 6.3 million. So if we did not have the adjusted EBITDA, it would have been BRL 15.4 million in Q2 of 2025 or 22.6% of the net revenue. Now going to the last slide. Before I delve deep on the chart on the left, I would like to say that we had a result before taxes of BRL 9 million, a positive result. And with that, we reported that the LAIR that until June was negative in BRL 6.9 million. So that is why we go from the right-hand side graph, the accumulated taxes of BRL 2.2 million. When we result working capital and other net losses, we observed that we had a cash generated by the operations of BRL 12.9 million in the first 9 months of this year. And when we adjust taking out interest and CapEx, we have a free cash flow of BRL 3.9 million. On the right-hand side chart, we see that with this operational performance and cash generation, Neogrid closed September of '25 with BRL 127 million in cash, growing position in net cash, discounting all the obligations that we have with debt and M&As. This is the biggest result of the company since December 2023. And this result reflects our operational increase and also impacted by the reversion of earnouts to be paid, which reduces our liabilities. With that, we wrap up and now we are open for Q&A. So let's collect the questions and answer questions now.

Thank you, Nicolas and Augusto for the presentation. With that, we will start the Q&A session. [Operator Instructions] Our first question comes from Fernando Amaral, investor. You mentioned the evolution of Neogrid to accompany more agentic. What do you think that this is going to represent in the current portfolio of solutions and how this approach translates in practice in terms of value for the clients?

Well, first of all, I would like to thank you for the question. When we talk about Neogrid as an agentic company, we are talking about the maturity of our products. So we stop acting just an analytical tool and we provide more alternatives for the operations of our clients. So in practice, it means that we're developing solutions based on AI, autonomous agents that can capture data, make decisions and execute actions in critical processes of the supply chain. For example, automatic adjustment of orders in the Mercantil EDI, innovations in retail. So because what we think is don't we have the self-driven car, so why can we have a self-driven system that adds value to our customers because that will entail cost reductions and optimizations to our clients. These agents will be supported by NIA, which is our proprietary artificial intelligence that learns with the real behavior of the supply chain. So we have a lot of market data. And with that, we have a very rich source when this is connected to artificial intelligence. And with that, the value to the client comes in 3 dimensions. First, in terms of speed in decision-making, then precision and efficiency by letting teams free to contact on activity; 2, concentrate on activities that have a more strategic impact. So free people from the operational part and focus these people for the strategic part. So in Neogrid, agentic is what is going to play a role in the chain to become a real autonomous copilot for the operations of the industries of collaboration and retail. So I'm very happy to implement that in Neogrid.

Our next question also enriched by Gustavo Farias from UBS. You have mentioned some AI initiatives, both to bring more operational efficiency as well as to complement the portfolio and allow the process to launch the aging fabric. So how has this been demand be? And what is the growth in terms of margin related to that expected?

Well, thank you for the question. The AI front is in the core of our strategy. We had the previous call and we mentioned that and now evolving for native fabric is to accelerate the AI practice in the products to have more autonomy. The demand has been very positive, especially in clients that use our solutions or that already have AI in their operations and want to evolve for more autonomous processes like I mentioned in the previous question about the autonomous supply chain. Also, we see a very -- a big trend of companies looking for this kind of operations, but they don't know how to implement or where to put artificial intelligence to generate more ROE in the operations. So the companies want to do that, but they don't know exactly internally where to implement and where to add value by using AI. And Neogrid has all this knowledge and all the products that offer that to accelerate this journey in our clients. So the role of Neogrid is to support this customer journey, integrating and applying AI in all the supply chain focused on adding value. From the financial point of view and going straight to the question, the capture of more profit comes from 2 dimensions. First, with a new competitive edge and more -- bigger dimension of products. And we don't want to implement products. We want the products to be adopted and that they add value to our clients. And the second point is to do internal automation. So we know that having agents in our products, we want to be an agentic company also inside Neogrid and reduce operational costs. So reduce the cost of serving and or in other words, do more with less. So we are working on tools, not only for the clients, but inside Neogrid in order to do that. And this is -- these are the next steps that we're going to do. And it's also important to highlight that the effect of the internal automation generally appear in the gains of revenue. So we have already seen some of that. We have already started implementing artificial intelligence in the internal processes. And we see some efficiency gains reflected in the results that we are presenting. So we are strengthening our capacity to generate value and increase value, both for us and our customers using intelligence as a real vector of growth for Neogrid. So we're very happy with this path as well.

Next question, bringing 2 questions together, one from Gustavo Farias at UBS. What are the main drivers of the expansion of margins as of now after consolidated the segment and reduced the team? And the second, Edmundo Assis, shareholder. We saw an improvement in the results of the company based on cost efficiency. Is there anything else in this line that is being worked on?

Well, thank you, Gustavo, Edmundo, thank you for the questions. It's a pleasure to have you here in this call. Yes, in fact, our result of Q3 was very positive especially for -- due to cost efficiency. But we understand that as of now, the expansion of markets need to be worked on 2 main fronts. First, an opportunity to have an operational scale that is significant. We have room to grow the operations even with maintaining the stall base and even after the reduction that was conducted. So we are improving support, client onboarding and all that. And this allows us to increase efficiencies and also increasing our capacity to get revenues in a quicker way, so we can grow revenue without growing costs in the same proportion. I think the second lever that Nicolas mentioned in his answer, is that we still see a lot of opportunity for automation and technological evolution. We have been evolving our platform and our infrastructure continuously, anticipating some contracts with important providers. With that, we see very important efficiency gains in cloud consumption, for example, and in the administrative side as well, reviewing processes with artificial intelligence, using tools that can also leverage efficiency and growth capacity. So at the end of the day, our objective is to make Neogrid a more agile and lighter company and reduce the cost of serving and make it even more agile.

Our next question is from Alberto Amorim, investor. So congratulations on the results. We have observed a consistent increase in operational expenses that contributes directly to the expansion of EBITDA. So which structural factors to sustain this efficiency? And how can we expect this to be maintained within the long range?

Thank you very much. This is a very good question. Yes, in fact, this improve in profitability is a consequence of what we have -- the transformation that we did in the company. So we consolidated the Board. We worked on governance. We made actions to become more agile. We are operating with much more budget discipline, implementing base 0 discipline so that we ensure that every expense generates value. And with revising structures and contracts in general as well, we are facing a scenario of recurring EBITDA generation. Of course, that in Q3 '25, because we changed direction very quickly, this was potentialized with some -- with the reversion of some forecast, but it is a fact that we have a positive EBITDA consistently. And the idea is to plan ourselves based on the pressures that we are going to have as of now. So like the reduction of the international revenue and reminding you that next year, we have the continuity of the pay bill. So this increases our labor cost, and we've been working a lot on that to be able to ensure positive OpEx even in this semester. I think this answered your question right. Nicolas, if you want to complement?

No, I think that you have said it all. Yes.

So the Q&A session is finished. So we want to give the floor to Nicolas Simone, so he can make his final considerations.

Well, first, I would like to thank everybody for the participation in this earnings call. And I would like to reinforce that we are doing what needs to be done here in Neogrid, simplify, gain efficiency, generate cash flow -- so -- and we want to continue doing that as of now with discipline and execution, operational excellence and this future vision. We are building a lighter Neogrid and more intelligent Neogrid, but ready to make these changes in a sustainable way and add value to all the customers and shareholders. So I want -- I would like to thank our customers for the confidence and the continuous partnership, for the shareholders for supporting new grid all along this journey and all the collaborators at Neogrid grid that have been restless in transforming the company and reaping good results. So I'm very happy with the team that we have, and that makes me confident that we will be able to reap even better results, so we follow together. And once again, I would like to thank everybody for participating in the earnings call. Have you all a great day, everybody.

Neogrid's webcast is closed. We thank you for your participation, and have you all a great day. [Statements in English on this transcript were spoken by an interpreter present on the live call.]