Zenvia Inc. (ZENVF) Earnings Call Transcript & Summary

Good morning and welcome to Zenvia's conference call. Today's speakers are Mr. Cassio Bobsin, Zenvia's Founder and CEO; and Shay Chor, 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. [Operator Instructions] 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 today for this important announcement regarding our new strategic cycle. As a navigate an ever-evolving business landscape, strategic cycles play a critical role in shaping the direction and growth of companies. This cycle allows us to adapt to market changes, focus our resources and position ourselves for long-term success. I'll start by quickly explaining how these strategic cycles have influenced our journey so far, the milestones we have achieved and how this new cycle is designed to drive innovation, efficiency and value creation for all stakeholders. Our mission since our inception 21 years ago, has always been to revolutionize the experience customers have with companies and brands. We recognized that we had 3 distinct strategic cycles so far in this mission. And at this moment, we are closing the third one and launching the fourth one. We had our first cycle, which was basically our start-up phase after being born in a garage as an SMS provider, then evolved to the second cycle where we expanded our messaging capabilities and consolidate 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 complementary companies, which over the last years, have reinforced our strategy and vision for the future. We officially launched Zenvia Customer Cloud in 2024. Zenvia Customer Cloud is the combination of this vision and is now our core business moving forward. Now 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 are truly excited about the Zenvia Customer Cloud and the immense potential it brings to our company. This platform represents a pivotal milestone in our commitment to enhancing customer experiences. Zenvia Customer Cloud is powered by AI-driven solutions and robust data analytics and is designed to adapt similarly to business of all sizes and across diverse industries. Clients are already using it, reporting enhanced customer engagement, increased sales and reduced costs. It is important to highlight here that the launch of Zenvia Customer Cloud was leveraged by 2 important and strategic initiatives, the use of product-led growth strategies in our international expansion in Latin America. Our product growth strategies empower users with flexible self-service access to our software, enabling them to start small, explore features at their own pace and simply scale usage as their needs evolve. This approach made possible through the integration of all services into a single unified platform ensures an intuitive and adaptive experience for businesses of all sizes by aligning perfectly with the needs of our clients. It drives higher adoption rates, fosters long-term customer relationships and creates a highly scalable revenue opportunity, positioning the idea for sustainable growth in a highly dynamic 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 our clients and prospects rather than the positional per seat SaaS model. This approach is enabled by the extensive use of AI in our software, which minimizes the reliance of human agents and has an efficiency for our clients 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 Zenvia Customer Cloud, further validating our strategy. The initial results we achieved in 2024, which Shay will share with you shortly, leave us energized and optimistic about the opportunities that lie ahead. This announcement today comes as a result of extensive analysis along with strategic planning and collaboration with our Board. As we work to develop this unified operating model, it became clear that this new cycle will require a much higher level of efficiency to ensure its success. Even though we have been streamlining our operations and bringing down our G&A as a percentage of revenue ratio throughout the last couple of years, concentrating our efforts on the company's core meant establishing new pillars to shape Zenvia that we aspire to become and need to be from now on in this new cycle. This resulted in difficult decision to lay off 15% of our workforce. As we announced yesterday, to ensure we entered this new cycle on a solid and sustainable foundation. As we enter this important new strategic cycle, we are laser focused on driving organic growth by leveraging our unified platform and marketing opportunities, evolving and accelerating our partnership ecosystem, boosting profitability through smarter operations and efficiency while reducing leverage to strengthen our formation foundation. At the same time, we are committed to building the optimal capital structure to support our ambitions and to ensure long-term resilience. These combined efforts position us to unlock meaningful, sustainable value and deliver solid returns to our shareholders as we move forward in our journey. I will now hand the call over to Shay to present some of the numbers we already have from the platform.

Thank you, Cassio. Good morning, everyone. Thanks for joining us at such short notice. This Slide number 4 brings a snapshot of our new core business, Zenvia Customer Cloud. We are pleased with what we achieved in 2024, especially considering that we were in soft launch mode from March to October when we officially launch Zenvia Customer Cloud. We estimate that we closed 2024 with almost 6,000 companies already using the platform, of which 20% outside Brazil, mainly from Latin countries, generating revenues closer to BRL 200 million. This client base is a mix of existing clients who transition seamlessly to Zenvia Customer Cloud and new clients acquired throughout the year. In terms of growth, we estimate this operation will expand by 25% to 30% in 2025, achieving a gross margin between 68% and 70% and a positive EBITDA margin. Our estimates are based on encouraging numbers from these first 9 months of operations, which are aligned with solid data showing that the addressable 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 puts us in a great position to make the most of these opportunities. Let's move to the next slide to talk about the next steps. We remain committed to streamlining our operations to enhance our efficiency. The headcount reduction announced is projected to generate cost savings of BRL 30 million to BRL 35 million in 2025, even after accounting for severance expenses. 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 noncore assets. We believe we own assets that hold significant value in their segments and an opportunistic divestment could play a key role in optimizing our capital structure. To wrap up, as we embark on a new strategic cycle, we're laser focused on expanding Zenvia Customer Cloud in Brazil and Latin America. Our priorities are accelerating organic growth while continuing to deleverage the company. We are confident that these actions will result in a more efficient company with exceptionally solid business metrics, enabling us to unlock significant value to our shareholders. Once again, we appreciate your continued trust as we move ahead. With this, we conclude our prepared remarks and are ready to take your questions.

[Operator Instructions]

While we wait for online questions. I'll get some on the written webcast here. "Cassio, can you elaborate more on charging per interaction versus seat? Do you see any execution risk on this approach?"

Yes, sure. Everybody that is studying the SaaS industry as a whole, understands that there is a movement going on of migrating for per seat charging to another model. And basically, that happens because as companies leverage use of AI, it reduces the amount of human users or agents that are required for each process. That's, of course, not a short-term trend, but a medium to long-term trend. At Zenvia, we -- as we or preparing -- we actually are prepared for this future. We launched Zenvia Customer Cloud, already adopting a new business model that replaces the traditional model of per seat charging for per interaction charge. And that means that companies as they start using our software, they start to use small from a single use case. And as they leverage most of their adoption using our AI tools, we're able to capture value from this new business model, even though they are not necessarily increasing the number of human agents. But if they increased the number of AI agents, we're able not only to monetize that, but of course, bring innovation for these companies. And that's working pretty well since we launched the first features, the first agents and AI-based features that is working amazing way. That's why we expect that being a leader and this transition for the industry will be a very good opportunity for us.

Thanks, Cassio, another one here, "In your past statement, you talk about the divestment of noncore assets, with your current switch to SaaS, would that include your CPaaS segment? If not, what would you consider noncore?" So I'll take this one. Everything that is not related to the Zenvia Customer Cloud or not -- we're not able to migrate the Zenvia Customer Cloud is what we call noncore. And that includes the CPaaS, but I would highlight one important thing here is that we believe that even though we consider some assets to be noncore, we understand that they have value they have solid metrics and therefore divesting from them means that it would have to generate value to shareholders meaning the valuation is what we would believe to be and also help the leveraging balance sheet. If this is not the case, we'll continue executing and operating even though we consider them noncore. Other question here, "curious what is the best way to think about the business moving forward? Are CPaaS and SaaS going to be reported separately, how Zenvia Customer Cloud cannibalizing revenues from that and what might count as noncore assets under the new strategic direction." Cassio, I think it's -- if you can just talk about the cannibalization of revenues, and I'll take the rest.

Sure. The numbers mentioned on the Zenvia Customer Cloud doesn't account any kind of overlap with CPaaS. These are pure numbers of via customer cloud customers. So we have no actually cannibalization in that sense. What we have and we always have are customers be encouraged to adopt more software, and that's why we focused on the ideal customer profile that they have been using SMS to start using Zenvia Customer Cloud and we got interesting traction from these customers. Hence, when we are projecting our growth, we're looking for Zenvia Customer Cloud customers per se, but not any kind of new migration from customers coming from CPaaS. That's why we understand that this -- all these operations are now healthy on their own ways.

And on the reporting, we will continue reporting for the time being, CPaaS and SaaS separately the way we've been reported. Obviously is that as we focus more in the near future on the Zenvia Customer Cloud, we expect at some point to start reporting that. But I would say, as of now, it's too early to give a timing -- an exact timing on when we are going to start reporting separately to Zenvia Customer Cloud. So at this point, you should expect CPaaS and SaaS to continue being reported the way we've been doing for the next couple of quarters. Another question here, "you mentioned in previous quarters that early metrics for Zenvia Customer Cloud were very encouraging, and the engagement towards 5 to 10x that of normal customers. Do you have any update on this?" I don't know, Cassio, if you want to share some early metrics on the Zenvia Customer Cloud.

Yes, sure. I don't have any new numbers to disclose at this moment. We'll be glad to disclose more metrics as the course of time as we are going to put our Zenvia Customer Cloud as our core. Of course, we're going to be able to share some more data. But in general terms, we've been keeping the same kind of engagement. That's why we are very, very optimistic on the growth of Zenvia Customer Cloud, especially as we combine sales-driven approach with a product-led growth approach, which is performing pretty well, that start using the software, they by themselves, they experiment, they explore new features. They start using, they go into production in them, they are able to leverage more revenues as they upsell to generate more interactions. They use more AI-based features and so forth and so well. So we've been the same kind of engagement going on with these new cohorts and the customers that we've been migrating from former solutions are also now benefiting from these new capabilities which encourage us to do this bold movement, we are very happy to do because we are seeing the very interesting foundations for the future we are building for Zenvia.

I'll keep going here. "Do you have any timeline for asset monetization? And are there any plans to divest on customer cloud SaaS solutions?" So we don't have any timeline for asset monetization. At this point, we are sharing with you guys the plan. We don't have anything specific to be discussed or shared in terms of divestment right now. So it's too early to discuss these moves. And as I previously mentioned, everything that it's not Zenvia Customer Cloud related is up for discussion. But again I'll highlight that we see value on those assets and it has to create and to generate value to shareholders when we are -- if and when we are to discuss any divestment. Cassio, can you tell us what client segments will focus on, as an example, SMB Enterprises, what's the focus of the company?

Sure. We are mainly focused with Zenvia Customer Cloud at B2C companies. And these companies are from a variety of industries. We have been serving customers from finance, retail, insurance, tech companies, services, education, so it's very diversified in terms of verticals. What is common between all these companies is they are serving lots of end customers.

You officially announced customer cloud service in October this year. Does it mean that your guidance provided today on cloud revenue would be for Q4 only. If so, you're expecting to increase this revenue by '25 on a year basis. So let me just explain. So we soft-launched the Zenvia Customer Cloud on March '24 and officially launched October '24. So when we say 9 months, it's considering the soft-launch from March. Basically, when we talk about the estimation, our estimated revenues between BRL 180 million and BRL 200 million for Zenvia Customer cloud that includes revenues for the entire 2024 year. So since their launch on March.

And to complement on that, the numbers we're disclosing here for Zenvia Customer Cloud are a combination of newly acquired customers, reports were acquired during 2024 plus customers that we migrated from former solutions, the stand-alone solutions from the companies we acquired. So this is a combination. We have a couple of thousand coming from each and that's why we disclose the combination of these 2 that are now our Zenvia Customer Cloud customers.

"Do you feel you have enough of a core in your customer cloud product at this point to grow and win share organically? Or do you expect to support your strategic plan with additional M&A?"

We definitely don't need M&A to grow Zenvia Customer Cloud. We have pretty much what we aimed in our strategic cycle a couple of years ago, which is an end-to-end journey from marketing to sales to customer support, to customer retention, engagement, we have AI, we have automation, we have multichannel approach. We have several different tools combined to provide a fully end-to-end solution to our customers. That's why we don't need acquisitions to grow and majorly, that's -- I would say that's the main reason we're very excited about what we built and numbers are getting very interesting in that sense. So we really are seeing that we are able to compete not only in Brazil, but also internationally. It's been pretty interesting to see all that happening throughout 2024. That's why we enter 2025 with very good expectations.

A follow-up here, Cassio, on this question, "how do you see your position outside Brazil?"

Sure. As we've been tasking in the last 2 to 3 years, expansion across Latin America, we prepared Zenvia Customer Cloud to be a very competitive product for the region. So as we deployed Zenvia Customer Cloud to these countries outside of Brazil, we have been performing pretty well. Of course, as always, there is some adjustments that we do for each country. But as we finish those adjustments, we see that it's a very competitive solution. So we are structuring our company for growth not only in Brazil but also internationally.

"What are your expectations aside Zenvia Customer Cloud for 2025? Will you be providing any guidance?" So traditionally, we provide guidance for full year when we report Q4. And we expect to do the same this year. So as we report Q4, which we expect to early April, we will be providing guidance for 2025. "Are there any synergies lost in Zenvia Customer Cloud from the spin-off of the CPaaS business, if it's the case?"

We don't see any loss of synergies as we have the possibility of spinning off CPaaS. As Zenvia customer cloud is a natural multichannel solution. We have partnerships for every existing channel to terminate and actually reach the end user. And in the case that we spin off the CPaaS business, we will do the same for the channels that are provided from the business units with the spin-off operation or any other partner.

Hugo, can you see any other last questions?

Sure, Shay. [Operator Instructions]

I think we've got another one. "Any commentary on the funding gap, how does the company looking for '26, '27 payout with the cost savings generating from the restructuring?" So obviously, the cost savings helps a lot. Just to put into perspective, we are talking about between BRL 30 million to BRL 35 million in '25, and that compares with EBITDA '24 that we provided guidance of between BRL 120 million and BRL 140 million. So it is a sizable saving. We don't see any issues with the long -- medium- and long-term funding gap as we are looking to divest it again, if it's accretive to shareholders and can be used to deleverage the balance sheet. That's one scenario. The other scenario is that with improved EBITDA, as we've been discussing, that will naturally lead to the leverage balance sheet. It's just that organically, it takes slightly longer than if we can divest from some assets. I don't see any further questions here, 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.

Well, thanks, everybody, for joining us at this conference call. This movement is a very important one for Zenvia. It closes a long-term strategic cycle started in 2018 when we intended to expand our portfolio to customer experience SaaS and we are very proud to be executing this over the last 7 years. And we reached a point where we understand we're able to finish the cycle in order to start a new one. It's a very important moment for Zenvia as we outline what will be this new cycle, and that's a very important not only a step but an outline of the future for Zambia, for our customers, for our shareholders. We're very excited for what the future brings us, and it will be very interesting to join and to share with all you guys our next steps and see you on the next one. Thank you. Thank you very much.

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.