Zenvia - Q4 2023

Transcript

Cassio Bobsin (CEO and Founder)

Hello everyone, I'm Cassio Bobsin, CEO and Founder of Zenvia. Thank you for joining us at Zenvia's fourth quarter and full-year 2023 revenues presentation. I'd like to start by addressing the transaction that we announced in the beginning of February to solve our medium-long-term funding gap. In this sense, I'd like to thank everyone who was directly involved in it, our financial team, the banks, the partners for making it happen, for their commitment to our long-term strategy. I won't get into the details of the transactions. I'll leave it to Shay. But the important message here is that the full confidence that I do, that we all do, in this new phase of Zenvia's expansion, and that's the reason why I personally committed BRL 50 million, or around $10 million, in the company.

We spent the last three years since our IPO building the most comprehensive CX solution for B2C companies in Latin America through a series of R&D and M&A initiatives. Zenvia is now a leading CX SaaS player, offering a cutting-edge customer cloud that enables B2C companies to sell more and serve better with a unified solution for automation, integration, and communication across the customer journey. We see a huge potential of cross-sell and upsell for our growing customer base with this new approach, as we will dramatically simplify how customers experiment with new use cases, and combine all of our integrated technologies within the same interface and price plan. This evolution also puts us in a strategic position to lead CX transformation across the untapped potential of the Latin American market.

In sync with this new phase, we're also unifying our business areas under a new organizational structure, as we announced a couple of days ago a new CRO role to consolidate the former business areas we had. To take over this role, we hired Gilberto Hansen, a veteran in the Brazilian software and IT scene, who formerly served as an executive in Brazil's top three software companies, Stone, Linx, and TOTVS. This new structure will be organized by customer segments instead of product divisions, reflecting the evolution of Zenvia's business and operating model towards a unified approach that will strengthen the company's integrated offering, opening new ways for customers to explore everything we're able to offer. Gilberto Hansen will also oversee two very important growth initiatives: the rollout of Zenvia Customer Cloud to all our customers, as well as our international expansion.

With these movements, Luca Bazzurro and Cristiano Franco remain working at Zenvia, now with a renewed focus and reporting to Gil. We expect that this enhanced organizational structure will create synergies and efficiencies between the former business units without incurring any additional costs. We are very enthusiastic about the consolidation of our portfolio expansion strategy, which led to Zenvia Customer Cloud and all the new possibilities of profitable growth for the near future, as we look forward to sharing more information with you in the coming months. Now, I'll hand over to Shay to cover our performance in the quarter and year.

Shay Chor (CFO)

Thank you, Cassio. I'll start with a snapshot of our performance in 2023 compared to 2022, and also where we headed into 2024. Our revenues grew 7% year-over-year in 2023 to BRL 808 million, translating into an adjusted gross profit increase of 15% in the period, with an adjusted gross margin of 47.4%, up by 340 basis points, and leading to a record normalized EBITDA of BRL 76 million, close to the midpoint of the 2023 guidance range. This is a result of a balanced and profitable revenue mix that is paving the way for our future growth. We are projecting growing of around 15%-20% of our top line in 2024 to reach between BRL 930 million and BRL 970 million, with adjusted gross margin remaining in the healthy level of between 42%-45%. Let's now dive deeper in the results of the quarter and the year.

We had very strong results in terms of top line in the last quarter of 2023. Both SaaS and CPaaS expanded two digits. In the CPaaS business, this performance attests to the full recovery of volumes previously lost when we were better balancing growth and profitability in a competitive market. It is important to highlight here that there's a third and very important component to this equation, which is quality. Zenvia is the leading CPaaS company in Brazil and guarantees, like no other, the level of delivery that is expected by our clients. CPaaS revenues grew an impressive 30% in the fourth quarter, mainly with wholesalers and large enterprises. Our SaaS business also delivered a solid increase of 16% in the fourth quarter compared to the same period of last year, and sequentially grew 11%, which is in line with the sequential growth we had seen in Q3 of 2023.

The growth in SaaS is coming mainly from SMBs, a segment that should form the cornerstone of our SaaS strategy in 2024. On a consolidated basis, revenues went up 24% in Q4 of 2023, bringing annual revenues up 7%, with SaaS growing 13% and CPaaS 3%. On the next slide, let's take a look at how this expansion has translated into a balanced and profitable portfolio mix. While in the fourth quarter snapshot, we can see a little higher mix of CPaaS and revenues when compared to 2022 and 2023, in terms of adjusted gross profit, there was a big increase in the mix from CPaaS, attesting to the balance of volume growth and profitability that we were seeking. Especially in the fourth quarter, when CPaaS grew 30%, its share of gross profit reached 62% compared to 54% in the same period a year ago.

The fourth quarter numbers are almost replicated in the full year picture, with SaaS reaching 37% of net revenues and 41% of adjusted gross profit, while CPaaS makes 63% of net revenues and 59% of gross profit. We are happy with this balanced and profitable portfolio of almost 13,000 active customers that trust us to take care of their customer journey. This portfolio is already producing a SaaS annual recurring revenue of BRL 250 million at the year-end, up from BRL 239 million at the end of December of 2022, mainly as a result of the M&A integration and increasing SMBs' business in the period. Regarding our net revenue expansion, it was heavily impacted by the downsell in large enterprises on the consulting business related to the macroeconomic impact in 2023.

We can already see a recovery with revenues up 1.5% when we compare full year 2023 to full year 2022 in this segment. Still, the downsell pulled net revenue expansion down to 102% compared to 124% in Q4 of 2022. Even though there are already signs of improvement in the conversion of cycles to large enterprise customers, we expect most of the positive impact to be recovered only in 2024. Let's now discuss our profitability. While adjusted gross profit remained largely stable in Q4 of 2023 compared to Q4 of 2022 in the SaaS business, the margin dropped 1,000 basis points to 64.5%, mainly as a result of the consulting business clients that are coming back slowly and with lower margins.

This was mainly offset by the CPaaS business, where adjusted gross profit went up by 40%, with adjusted gross margin also up by 380 basis points to 51.2% in Q4. Even though we have reached a good balance of volume and profitability, the higher CPaaS share in the revenue mix, by its own nature, impacts consolidated margins down, but again, these are still very healthy margins. When we look at the same picture for the year, we see adjusted gross profit expansion in both businesses, an increase in adjusted gross margin of CPaaS, and a slight increase in adjusted gross margin of SaaS, for the reasons we already discussed.

It is important to remember here that given our leadership in the Brazilian SMS market and the more balanced market dynamics, we have been able to leverage a more efficient cost structure to gain market share with certain strategic large enterprise customers, which led to the strong recovery in SMS volumes with healthy profitability levels that we are reporting. We are confident that this strategy is helping us improve our relationship with these customers, allowing us to capitalize on cross-selling and upselling opportunities. Let's now discuss our G&A expenses. Decreasing costs was one of the main goals for the company in the year, and we are happy to report that we accomplished a 13% decrease in G&A expenses in 2023 when compared to 2022, from BRL 147 million to BRL 129 million, a reduction of BRL 18 million.

This brought G&A as a percentage of revenues to 16% in 2023 compared to 19.5% in 2022, a 350 basis point reduction and a key factor to boost EBITDA to a record high, as we will discuss in the next slide. The record EBITDA in 2023 reflects all the efforts in terms of improving mix, margins, and streamlining costs. As you can see in this slide, the toll that we paid to pivot the business from CPaaS to a SaaS single customer cloud is far behind us, and we are now poised for new highs in 2024 and onwards. In the 2024 guidance that we have already released, we are budgeting an approximate 70% increase in our EBITDA for 2024 to reach the midpoint of the range between BRL 120 million and BRL 140 million.

Another important accomplishment that was finalized and communicated in the beginning of 2024, but was mostly developed in 2023, was a solution for our mid and long-term funding gap, as Cassio mentioned previously. Between extension of short-term debt with banks and the renegotiation of the earnout with Movidesk and D1, including grace periods, we were able to reduce around BRL 120 million in financial liabilities in 2024, extend maturities to at least December 26, bringing the new average debt term including both earnout and bank loans to 2.8 years from 1.6 previously. Now, long-term maturity loans comprise 78% of our debt. This was indeed a milestone for our company, and after this restructuring, we are much closer to having the optimal capital structure to support our strategic objectives while maximizing shareholder value.

As a subsequent event, and because of this improved capital structure, we raised additional funding with local Brazilian banks in the amount of BRL 40 million by the end of April. Next, to finalize, let's discuss our guidance for both 2023 and 2024. This chart brings a summary of how we delivered against our guidance for 2023. As you can see, we overdelivered on CPaaS revenues but underdelivered in SaaS revenues, mainly from the downsell in the consulting business for enterprise, which made us 3% shy on the revenue guidance for the year. In turn, we reached the high point of the range of the guidance for adjusted gross profit margin and its expansion. And in terms of the EBITDA, we got pretty close to the midpoint of the range.

To finalize, here's the new guidance for 2024, where you can see we expect to grow our revenues by 15%-20% in 2024, which is slightly below what we effectively delivered in Q4, reaching between BRL 930 million and BRL 970 million. Adjusted gross profit margin is expected to be in line with 2023 figures between 42% and 45%. In terms of EBITDA, we expect a growth of around 70%, reaching between BRL 120 million and BRL 140 million, being the low end of the range, similar to annualizing the normalized EBITDA we delivered in Q4 of 2023.

These expectations reflect our healthy portfolio with a balanced profitable mix, streamlined internal structure, and leverage under control. Thank you all for your support in 2023. We appreciate your continued trust as we move ahead. We are committed to building a profitable and exciting future for Zenvia. With this, we conclude the review of our 2023 results. Our investor relations team is available for any follow-up questions you may have.