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00:03 Welcome to Zenvia’s Third Quarter twenty twenty one Earnings Conference Call. Today’s speakers are Mr. Cassio Bobsin, Zenvia’s Founder and CEO; and Shay Chor, Investor Relations Officer.

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 a listen-only mode. [Operator Instructions] 01:02 Now, I would like to welcome one of your speakers for today, Mr. Cassio Bobsin, Founder and CEO.

Sir, the floor is yours..

01:14 Welcome to Zenvia’s Q3 earnings call. I’m Cassio Bobsin, Founder and CEO of Zenvia. Today, we’re going to present the key highlights of the quarter and provide you with an update of our business. I would like to start by highlighting that we delivered on what we promised investors during our IPO process in late July.

Solid revenue growth and strong gross margin expansion year over year. 01:41 Shay will review with you the numbers in more detail, but I would like to highlight a very healthy revenue growth above forty percent with more than sixty percent increase in adjusted gross profit in a four percentage point expansion in gross margin.

We are confident in our ability to continue delivering a strong set of results in the next couple quarters. I'll tell you how in the next slides. 02:10 Here at Zenvia, we’re building a long term vision from the ground up. Let me explain a little bit more how we evolved and where we are headed.

In our early days, eighteen years ago, we started by enabling communications for our businesses with our end customers. We would enable our clients to send one way messages with product offerings and services through our platform. 02:31 After for some time, we started enabling conversations for our customers.

So, the one-way message became two-way conversations. A good example of this is when a customer from our client can chat with a person our chatbot for support.

Today, we're moving to our next digital phase of enabling journeys that happen when the end customers of our clients are engaged in a variety of ways across their life cycle through multiple communication channels, but we are already foreseeing and preparing for our next phase, which will be focused on enabling experiences, allowing customers who experience a streamlined relationship with the brand no matter the channel or moment in time.

03:11 On their minds, everything will be perceived as a continuous conversation resulting in more valuable customer interactions and brand loyalty. 03:18 Let's move to next slide to better understand it.

So, how to do this at Zenvia? Our unified end-to-end platform currently provides our customers with the combination of channels that enable them to talk and engage directly with customers in multiple ways.

Two, enable these channels to the automated and integrated the company’s processes and systems and suffer service solutions that are suited for each moment during the customer journey. This is how we got here, but as I said, we are already evolving and this evolution is data driven.

03:54 The ability to collect data and build better performance of the end customer is becoming increasingly relevant to companies working in the customer experience as a surface segment. The SaaS for us, the main change is that data will now be at the core of our platform.

By using data analytics, we can provide our clients with actionable insights, enable them to generate automated customized actions in different touch points of the customer journey, creating more and more personalized and seamless experiences and customers. 04:25 And here is where our M and A strategy is key as you will see in the next slide.

We have been pursuing acquisitions to grow through our total lifetime. And to our IPO, we had completed eight acquisitions. In the beginning of November, we announced our first transaction after the IPO. We acquired SenseData, a very strategic movement for us as it represents the first step into putting data in the core of our solutions.

04:54 SenseData was founded only six years ago, concurrent one hundred and forty clients across thirteen different industry verticals, mainly in finance retail health and software. Its annual recurring revenues grew by seventy five percent in the last twelve months to approximately eleven million reais, with [indiscernible] and software.

05:13 Its annual recurring revenues grew by seventy five percent in the last twelve months to approximately eleven million reais with an adjusted gross margin of sixty percent on a standalone basis. We estimate acquisition to be done at a [mobile of] [ph] two point two times EV over sales twenty twenty three at the end of the earn-out period.

05:35 SenseData solution is based on this three remain concepts and technology. Sense Connect, this purpose of framework simplifies integration with several software platforms to connect the customer data in a fast and secure rate.

Sense’s quarter may feature behind SenseData success that’s appropriate platform and framework to analyze data in order to generate valuable analysis about each customer’s journey and actual insights.

06:01 SenseData technology does enables companies to create automated communication processes based on Sense score that leads to better customer experiences and engagement. Still on the M and A topic, I would like to provide you with a quick update on D1 integration.

06:18 We've been moving fast into integrating D1 platform with their customer base already benefiting from the scale or robustness of our communication channels.

At a commercial front, we'll be working together to lead the CX transformation of our enterprise customers, joining forces and expertise to move this customers base communication processes and to a journey wide implementation that is integrated and leveraged by data in AI.

06:44 Finally, we are seeing a lot of opportunities to continue consolidating the market. Our strategy will continue to sign to acquire companies that can complement our technological ecosystem and our pool of talent, and therefore, improve our value offering. 06:58 I'll now pass on to Shay, who will discuss our key financial metrics in more details..

07:05 Thank you, Cassio. This is my first earnings call since I joined the company two months ago. I'm excited with the challenge of helping investors better understand our company. I believe we are flying below radar screen, and this is the main reason why our shares are undervalued.

07:22 We are working to change this and as Cassio mentioned, we are confident in our ability to continue delivering improved results and generating positive news flow. Before I move into the numbers, I would like to emphasize that as of Q3, we are already consolidating D1 in our results.

For this quarter, we have only two months of Q1 one, so Q4 will actually be the first one with full impact of D1 acquisition. 07:46 Now, moving to the results. Our client base grew by almost twenty five percent and in the quarter with eleven point three thousand active clients already consolidating both [indiscernible] and D1 our base.

Our strategy allow us to retain existing clients and to continue growing their usage of the platform through an up-selling and cross-selling. 08:09 This directly impacts our net revenue expansion rate that reached one hundred and twenty two percent in the quarter, a ten percentage point increase when compared to the same period of twenty twenty.

And also, five percentage points from June twenty twenty one when it was one hundred and seventeen percent. 08:25 These numbers do not include the one. As in this metric, we only consider clients that have been in the base for twelve months.

If you were to include D1 clients, the net revenue expansion rate would have been one hundred and twenty eight percent in this quarter.

08:40 All these led consolidated revenues to expand forty three point seven percent to one hundred and sixty three point seven million reais, accumulated four hundred and twenty two point one million reais in the nine months period.

08:54 Revenues beyond SMS termination already accounted for thirty two percent of total revenues this quarter, a sequential improvement when compared to the twenty two percent in Q2 and double from the sixteen percent reported in Q1 even with higher revenues.

This is in line with our objective and promise of improving revenue mix to generate higher profitability and a test to the solid execution of our team. 09:21 Our adjusted gross profit increased sixty one point five percent year over year to fifty seven point eight million reais reflecting the solid revenue growth.

In addition, as a result of the evolution of our platform, both organic and inorganic we estimate that the portion of our business that goes beyond SMS termination represented sixty percent of our adjusted gross profit in the Q3.

09:45 This improved mix led adjusted gross margin to improve three point nine percentage points to thirty five point three percent, a record high since Q1 twenty nineteen, which a test for the improvement we have delivered quarter after for a while now. 10:02 Zenvia had been a profitable company since the beginning of its operations.

During late twenty eighteen, we realized our unit economics worked and that we had a large and untapped market opportunity ahead of us. As a result, during twenty nineteen, we decided to reinvest in our business to accelerate growth, expand our platform and capture share in this highly fragmented market.

10:31 By design and with the full support of our board and shareholders, we have reduced our EBITDA margins in order to invest heavily in sales and marketing and R and D to accelerate our go to market strategy.

With that said, our normalized EBITDA in the first nine months of twenty twenty one, which excludes expenses related to earn-outs was positive four point one million reais. 10:54 Let's move to our mid-term guidance.

Given the solid set of results, we have delivered in Q3 twenty one, our pipeline of acquisitions and our confidence in continued delivery strong growth with high capital efficiency will reiterate our objectives for the next two to three years.

11:12 Revenue growth ranging between thirty percent and thirty five percent, gross margin reaching forty five percent to fifty percent, and finally, EBITDA margins scaling back to historical levels ranging from fifteen percent to twenty percent. This concludes our prepared remarks, we can now move to the Q and A session..

11:32 We will now begin the question and answer session. [Operator Instructions] Okay, then. Our first question comes from [indiscernible] self-side analyst from UBS. We are now opening the audio so that you can ask your question live. Please go ahead..

12:18 Hi everyone can you hear me?.

12:21 Yes, we can go ahead..

12:22 Okay, perfect. First of all, thank you very much for taking my question. I have one question regarding margins. In the third quarter, you have spent around fifty percent of revenue in G and A, and an IPO bonus of forty million reais, both of which impacted your margins.

We would like to understand what can we expect as recurring expenses going forward and what can we expect in terms of short and long-term growth and EBITDA margin? Thank you..

12:53 Thanks for the question [Vitor] [ph]. So, if we look into Q3, actually, we had a total forty five million reais in one off expenses related to the IPO. So, when we exclude that, the G and A as percentage of revenues was around twenty one percent that compares to twenty three percent in Q3 of twenty twenty.

So, this the level of G and A as percentage of revenues should expect in this between twenty percent twenty two percent going forward. 13:25 As to EBITDA margins, as we said, we've been accelerating our spending in sales and marketing in R and D. And this will continue in the next couple of years.

And that's why we have that mid-term objective, which means between two to three years of bringing EBITDA margin back to that fifteen percent to twenty percent historical level that we had in the past..

13:57 Perfect Shay. Thank you very much..

14:01 Okay. Thank you for your question. [Operator Instructions].

14:25 Roger, I have a question here on the webcast no voice, so I'll take it. Could you please disclose organic growth ex the D1 and what percentage of customers now use more than one product? 14:41 I'll start with this and this has been a question that we've been getting about D1. So, in Q3, Zenvia without D1 grew revenue by thirty percent.

And then the rest was D1. So this gives you an idea of the organic growth that we've been delivering in Zenvia. 15:13 In terms of gross profit, just to add them, in terms of gross profit just to add this gross profit expansion without D1 was thirty six percent considering Zenvia only.

15:33 And I’ll let Cassio, do you want to comment on cross-selling and how much of our products – our clients are using more than one product?.

15:44 Yes Shay. Thank you. We unfortunately don't disclose cross-selling metrics on a quarterly basis. We expect to have that metric available in our Investor Day. Last time we disclosed that was around fifteen percent. We are working into improving that cross-sells of [going quarters] [ph].

16:13 Just to get better [indiscernible] of this third quarter, D1 accounted for around two of the three months on the period. So, we didn't get impact of the whole D1 numbers on this quarter..

16:37 Okay. I have more questions here.

Have you seen any impact from weaker macro in Brazil? Are you seeing upward pressure on staff costs? And how difficult has been to hire talent especially developers?.

16:57 We're not seeing major impacts in terms of economic aspects of the countries you operate, especially Brazil. Although, we understand the market is quite dynamic on the projections of GDP for next year. We always had positive growth on the company. Even the times that we had crisis, the pressure occurring within the region.

So that's why we don't expect to this low growth considering any impact pf economic recovery in the country.

17:39 And talking about talent, we keep investing and growing our talent pool and we have been working pretty well on that SaaS, we expand our headcount very important direction in the last quarter, and we expect to grow headcount according to our strategy and so we are suggesting more, sales and marketing more in R&D.

Of course diluting our G and A expenses as we are expanding our revenue and our gross profit over time.

18:13 We tend to get a lower pressure on the G and A, but talking about talent itself, we see that the market is hot for quality people that are looking for, but it is and we are performing pretty well and attracting the best talent for the company..

18:39 Roger, do you want to check if we have questions for voice?.

18:44 Perfect. The next question comes from [indiscernible] buy-side analyst from Goldman Sachs. We are now opening the audio, so you can ask your question live. Please go ahead..

19:00 Hi. Thanks for question. Quick question from our side. I suppose you could estimate that from the organic growth figures, but would you have a figure for our pro forma revenue and gross profit exposure to beyond SMS termination revenue in the third quarter? Not sure if I might have missed this in the original presentation.

I had some connection issues on my end. Thank you..

19:30 Thank you, Victor. Actually, we not disclosing pro forma for SMS termination. So, it would not be that far from where from where it landed because actually, we are consolidating, remember we’re consolidating two months of the one already. So, we would not be that far.

Just to give you in terms of total revenues for you to understand, we reported one hundred sixty three point seven million reais and pro forma for D1, we would have reported one seventy one point one. 20:06 So, that will be the difference in total revenue.

So, we give you a sense that the difference in the revenue mix and the gross profit mix would not be that that different. Another point to help you is that gross margin we reported thirty five point three percent and pro forma it would have been thirty six percent. So that gives you sense of the impact..

20:40 Thank you. And just another question from our side again. That wasn’t discussed yet. Could you give us some more details on –detailed update on how your acquisitions pipeline is looking following the acquisition of SenseData? Thank you..

20:58 Yeah. We’ve been working on consolidated M&A pipeline of several partners of being working last couple of months, and we expect to have, I would say, a few occurring. So, we can of course got the user proceed supplied and a way that we accelerate our strategy of evolving our portfolio.

That’s the main strategy that we will be working from [indiscernible]. And then we expect these to really add valuable solutions to our platform that would make total SaaS in terms of evolving or positioning as a consolidator obviously excellent scape across LatAm..

21:50 Very clear. Thank you very much..

21:54 Thank you for your question..

21:56 So, I have more questions here on the webcast.

Can you please update on growth outside Brazil? This appears to be a bit slower? When should we see an acceleration and benefits of indirect channels in new geographies?.

22:17 Actually, we're seeing a very strong growth also in Brazil, perhaps we are seeing that, we are growing LatAm, but Brazil is still growing pretty strong, which actually shows that will have pretty large TAM, and will have several opportunities within the Brazil, of course, as well with LatAm.

So, we’ve been evolving both directions benefiting from all that TAM, Brazil and also this regions on scaling and rolling out our solutions to other countries.

22:50 We’re in the middle of that as some of these products that we acquired [Morrison White] [ph], they were at [indiscernible] [ph] Brazil, a part of the integration is to roll-off those solutions to become global solutions. So, that's why we expect that to be further accelerated in the future..

23:17 Next one is, can you please comment a bit on the competitive landscape? And what is the impact on Zenvia’s business directly and indirectly if any from changes in Apple by the tracking upcoming changes at Google, etcetera?.

23:36 Yeah. Looking at the big track ecosystem, we are not affected at all. By these changes in at all as we work mainly with direct communication channels, which means we're not any form of depend of any media, or at or display at or that kind of Google and Apple market decisions. So, it doesn't impact our business at all.

24:09 I'm looking at the competitive landscape, we're seeing that companies are really going in a very strong way for these conversational channels. They're trying to become less dependent on these closed ecosystems where you don't see who the customer is, and for ecosystem that are more open then you can actually talk directly to another customer.

24:37 They make that relationship happen, and that's why we're developing our platform to become the CX communications platform that will connect the dots along the journey, enabling companies to really create better express to this communication channel.

So that SaaS may compete mostly with Niche SaaS offerings that are usually spread well for the regions we operate.

And as we've been growing the platforms stating it, we are seeing that the value proposition were building is very competitive with against this small niche players, and we also face sometimes competition from global more enterprise [indiscernible] solutions, more enterprise [indiscernible] solutions than when we compete with them, we are much close efficient for local original companies, which means they can have the same technologies and benefits with us with a much better price, way to customize and so evolve adoption of further their processes.

25:53 In a way that opens up a really big opportunity for us to consolidate that and also answer enterprise customers with solutions that that are much more interesting than they find and there’s global players..

26:10 So next question comes from Christian [indiscernible]. Can you comment on the drivers for the net revenue expansion? It increased ten percentage point year over year.

So I'd like to understand better what's behind that growth?.

26:28 Yeah. I'll say that major aspect is that we keep churn low. We have everything that we do [indiscernible] and that takes leap, adds composes on NRR. We see solutions based on some apps are still growing. We see that this new solutions are more for conversational basis, conversation based communications with WhatsApp and Instagram and Web chat.

26:59 They are growing pretty strongly. And as we are also entering that journey part of our strategy, we're happy – we're helping connect data and create very interesting ways to engage end customer. This is creating a very powerful way to get deeper into these companies.

So, we are improving our presence on the enterprise customers that's driving a lot of these [indiscernible] and we are getting lots of efficiencies retention improving retention and adoption of also from FMB’s. So that's – I – basically combined a combination of all these forces that are giving us healthy [indiscernible].

27:47 And hence we expect these on NRR to get to be – if an improved in the future as we will roll-out of these cross-selling [indiscernible] but will unlock all the potential that we have in terms of the platform robustness and complete submission..

28:09 One more here.

Cassio in the earnings release, you mentioned Instagram as a new channel, can you elaborate more on that and tell us where you see that going?.

28:22 Yeah. Definitely. As we're positioning our solutions as movie channel solutions. The addition of Instagram it's going pretty smoothly to our customers. We're helping them to set up the channel with the current solutions they already have, which is giving us better lock-in.

28:43 It's also creating a stronger, a new stream of conversations with customers as these companies open – every time a company opens up and new commission and channel with customers that day are already using. This gives us more usage of the platform. And that's the path that is occurring with Instagram as we rolled out a couple of months ago.

We already have a couple hundred customers using actively this channel, and expect to be a massive channel, as SMS and WhatsApp on the future..

29:29 Next question here is, I think you mentioned that in your remarks, but I missed the number, can you repeat what was the NRR pro forma? So, yes, as we commented in the call, the NRR, net revenue expansion rate pro forma for D1 was one hundred and twenty eight versus one hundred and twenty two reported without D1.

30:01 Roger, do you want to report to see if we have more questions?.

30:07 Let me check right here. [Operator Instructions] Okay, then. This concludes our question and session. I would like to turn the conference back over to Mr. Cassio Bobsin for his closing remarks..

30:49 Thank you very much everybody for joining us this q and a session and our webcast. It is being a massive trajectory has been – it is a public traded company last couple of months. And we are very excited about everything that's been delivering and the plans that we have, the vision that's becoming a reality.

31:13 We expect the next couple of months to engage again with you guys to better explain and give you another milestone off that long term strategy. So, thank you very much, everybody..

31:28 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..