ZENVIA Reports Q3 2023 and 9M 2023 Results
Fifth consecutive quarter with positive Normalized EBITDA, totaling BRL16.5 million with LTM Normalized EBITDA of BRL78.7 million already within the of guidance range for FY 2023
SÃO PAULO, Nov. 16, 2023 /PRNewswire/ -- Zenvia Inc. (NASDAQ: ZENV), the leading cloud-based CX platform in Latin America empowering companies to transform their customer journeys, today reported its operational and financial metrics for the third quarter and first nine months of 2023.
Cassio Bobsin, Founder & CEO of ZENVIA, said: "Our results in the third quarter of 2023 further underscore our continued efforts to balance revenue growth with profitability. While the economic environment continues to be challenging, we have been managing to expand our SaaS business among all customer profiles and increasing volumes in CPaaS with healthy margins. Our progress in this third quarter demonstrates our adaptability and strategic foresight as we navigate this evolving market. Currently, we are also integrating SenseData into our operations. As we finish, we will have completed the full integration of acquired companies. For 2024, we will keep integrating the platforms and systems throughout key structuring projects that will enable us to deepen our product bundling and cross-selling capabilities."
Shay Chor, CFO & IRO of ZENVIA, said: "Our third quarter 2023 results attest that we are successfully navigating the complex Brazilian macroeconomic climate, which can be particularly evidenced by a double-digit sequential increase in SaaS revenues, which we expect to be the foundation for our growth in 2024. Total revenues for the quarter also grew 13% sequentially. The strategic decision to offer more balanced pricing and service level agreements to certain large enterprise customers led to a strong recovery in SMS volumes. We maintained our streak of delivering positive EBITDA, recording BRL16.5 million in the quarter, and marking the fifth quarter in a row of positive Normalized EBITDA. Year-to-date, our EBITDA already totals BRL55.7 million, and we are on track to meet the guidance for the full year. In fact, our LTM EBITDA of BRL78.7 million is already within the range of guidance for FY 2023."
Financial Highlights Q3 2023
Financial Highlights 9M 2023
We report Revenues and Non-GAAP Gross Profit broken down by SaaS and CPaaS. We believe this is the best way for all stakeholders to understand our business and growth levers.
In Q3 2023, our SaaS business Revenue went up 2.2% YoY to BRL75.3 million, of which BRL58.2 million was recurring-based, compared to BRL73.7 million in Q3 2022, of which BRL58.9 million was recurring-based. When we compare 9M 2023 to 9M 2022, the increase of 12.1% was mainly driven by the full consolidation of Movidesk, which was completed in May 2022. Our SaaS annual recurring revenue (ARR)(5) at the end of September 2023 stood at BRL233 million. Also, our Q3 2023 SaaS revenues increased 11.6% sequentially, from BRL67.5 million in Q2 2023, in all customers profiles, which should be the foundation of our growth for next year.
As expected, in Q3 2023 we noted a double-digit sequential increase in SaaS revenues, mainly in our business with large enterprises, partially reverting the negative impact of the downsell related to macroeconomic activities of the previous couple of quarters, but still not enough to return to Q3 2022 levels.
In terms of our profitability metrics, the Non-GAAP Gross Profit for the quarter went down 4.2% YoY to BRL46.0 million, from BRL48.0 million, due to lower Non-GAAP Gross Profit from large enterprises. In Q3 2023, our SaaS Non-GAAP Gross Margin was 61.0%, down 4.1 percentage points YoY. For the nine months of 2023, our Non-GAAP Gross Profit went up 13.0%, mostly as a result of revenue growth and Movidesk consolidation.
It is worth highlighting the integration of SenseData, which started in the beginning of Q4 2023 with the end of the earn-out period. SenseData teams are already being integrated and we expect to consolidate its platforms and systems throughout 2024.
SaaS Case Study: Imóveis Crédito Real
With over 90 years of experience in the Brazilian market, Crédito Real is a pioneer in the real estate segment and has consistently adapted to evolving trends and client demands. As a result of the pandemic, Crédito Real saw increased demand for digitized services within the sector, with clients looking for faster ways to resolve their issues and even complete an entire rental process digitally and autonomously.
With this in mind, Crédito Real chose Zenvia's customer experience platform to optimize and automate its WhatsApp service, increase the responsiveness of its channels, and have a complete record of all client contacts integrated with its CRM system. With Zenvia's platform, Crédito Real integrated more than 14 chatbot journeys to meet demands ranging from rentals, scheduling, notices and evaluation of visits, property rental proposals, documentation transmission, issuance of duplicate bills, maintenance and more.
(5) ARR is calculated by multiplying the recurring revenue of September 2023 by 12.
As a result, almost 30% of the contracts signed will come from WhatsApp leads in 2023. In July alone, more than 139,000 messages sent and received by clients were recorded on this channel. Importantly, the transition to digital service remained humanized, giving the client the option to connect to human service.
"We've managed to design a journey in which the clients can currently send the rental documentation all on their own. Our potential clients tell us what they're looking for, whether it's the neighborhood or the city, and they can even schedule a visit directly via WhatsApp. For Crédito Real, it was key to have a partner who understood our needs. Zenvia was able to tag along the flow we designed and we were able to solve everything possible to speed up our client's service," said Priscila Santos, Project Manager at Imóveis Crédito Real.
In the CPaaS business, as explained in previous quarters, until H2 2022 we have pushed for profitability, by not engaging in price wars, which led to lower volumes, but also to higher Non-GAAP Gross Profit. Although we understand that the results of this strategy were positive, they were also very specific for the market dynamics at the time. Given our undisputed leadership in the Brazilian SMS market and the more balanced market dynamics, we have been able to leverage on our more efficient cost structure to gain market share with certain strategic large enterprise customers, leading to a strong recovery in profitable SMS volumes while maintaining profitability at healthy levels. We believe that this strategy will help us improve the relationship with these customers, allowing us to also cross sell and up sell.
We reported a 34.4% YoY increase in CPaaS revenues, which totaled BRL143.3 million in Q3 2023, up 14.2% when compared to Q2 2023. YoY. Our Non-GAAP Gross Profit decreased 1.6%, to BRL38.0 million from BRL38.6 million, with Non-GAAP Gross Margin reaching 26.5% in Q3 2023 compared to 36.2% in Q3 2022, down 9.7 percentage points. This is a direct result of our strategy to find the correct balance between volumes and profitability, attesting to our ability to solidify the mature CPaaS business and demonstrating its potential to generate cash, which is instrumental to funding the expansion of our SaaS business.
In line with the company's vision of offering customers a new world of opportunities through an integrated platform that unites fluid, engaging, and personal experiences, Zenvia initiated a partnership with Google to adopt Google Messages RCS (Rich Communications Service) into Zenvia's platform. Google's RCS technology, which is only available for Android devices, offers greater customization of sent messages, end-to-end encryption, and deeper metric analysis over SMS, allowing access to data such as read confirmations, clicks, and interactions. With the broad adoption of Android devices in Brazil, which are part of daily life for millions of Brazilians, RCS is becoming an increasingly relevant channel in marketing and customer service operations.
The program is currently in the pilot stage with certain clients testing RCS messaging on the Zenvia platform. Upon completion of the pilot stage, Zenvia plans to become the benchmark in offering Google Messages RCS to all clients at the same price as SMS contracts, improving the customer journey and providing Zenvia clients with greater insights through smart features and a data-driven approach.
CPaaS Case Study: UniCesumar
UniCesumar is one of the ten largest educational groups in Brazil, with over 400,000 students across 1,000 distance education centers in every Brazilian state, six on-site campuses, and three international hubs. As UniCesumar continued its expansion, it realized that a switch to digital support channels was necessary, as its service operations previously relied entirely on telephone, leading to an overextended customer support team and long waiting times for students trying to get in touch.
To solve this issue, UniCesumar leveraged Zenvia's customer experience platform to send SMS messages directing students to digital channels such as WhatsApp. Now, when students reach out for assistance, they automatically receive a message with the option to complete the service via the digital channel rather than by telephone. Since its implementation, the company has seen a 21% drop in service over the phone, resulting in a significant improvement in service capacity. Digital channels now serve as the main contact tool, with a 101% increase in the take-up on this option from Q1 2023 to Q2 2023. Students are now seeing drastically reduced waiting times, which has led to a drop in the contact abandonment rate and an increase in customer retention.
"We believe in the importance of giving our customers not just one, but several ways to connect with us. This goes far beyond simple telephone service. True innovation lies in the ability to migrate smoothly and efficiently from one channel to another. That's why we've invested in implementing omnichannel in our services. Zenvia has been fundamental in this construction, because through its innovative solutions, we have been able to connect and integrate our platforms, offering our customers various ways of reaching out to UniCesumar," said William Diego Marcondes, Head of Channels at UniCesumar.
Consolidated Financial Results
Sequentially, revenues went up 13.3%, as a result of the expansion of SMS volumes with certain large enterprise customers in CPaaS, coupled with an increase of 11.6% in SaaS revenues with customers from all size profiles.
EBITDA in Q3 2023 was positive BRL15.9 million, compared to negative BRL0.2 million in Q3 2022. If we compare the first nine months of 2023 and 2022, our EBITDA evolved to positive BRL55.0 million in 2023 from negative BRL24.9 million in 2022 – an increase of BRL79.9 million. This stronger EBITDA is mainly related to the 10.9% Gross Profit increase and the execution of our savings plan initiated in July 2022, including the restructuring announced in November 2022 that led to an 8.4% drop in G&A expenses to BRL100.4 million in 9M 2023 from BRL107.5 million in the same period of 2022. This reduced the ratio of G&A as a percentage of revenue to 16.7% in 9M23 from 18.5% in 9M22.
FY 2023 Guidance
Additional information regarding Zenvia can be found at https://investors.zenvia.com.
Our SaaS Portfolio
Our SaaS solutions can be used alone or combined, allowing companies to start a program in a matter of minutes, or they can go all the way to a fully integrated, automated, and intelligent customer journey. We also provide CX Tools that can be used to integrate and automate the customer experience in various ways. Our main tools are Application Programming Interface (APIs), a robot-like software program that performs automated, repetitive, pre-defined tasks (Bots), Natural-language understanding (NLU) and tools that enable companies to manage documents securely and safely during the end-consumer journey (Docs). The Quantum platform connects all our solutions and tools with the client's systems and processes. Companies can access our platform and start choosing from any solution or tool. As they go deeper into adopting multiple parts of the platform, we can break down all CX barriers and unlock the true potential for end customers.
SELECTED FINANCIAL DATA
Special Note Regarding Non-GAAP Financial Measures
This press release presents certain non-GAAP financial measures, which are not recognized under IFRS, specifically Non-GAAP Gross Profit, Non-GAAP Gross Margin, Non-GAAP Gross Profit for our SaaS business segment, Non-GAAP Gross Profit for our CPaaS business segment, Non-GAAP Gross Margin for our SaaS business segment, Non-GAAP Gross Margin for our CPaaS business segment, EBITDA, Normalized EBITDA and Non-GAAP Operating Cash Flow. A non-GAAP financial measure is generally defined as one that purports to measure financial performance but excludes or includes amounts that would not be so adjusted in the most comparable GAAP measure. Non-GAAP financial measures do not have standardized meanings and may not be directly comparable to similarly-titled measures adopted by other companies. These non-GAAP financial measures are used by our management for decision-making purposes and to assess our financial and operating performance, generate future operating plans and make strategic decisions regarding the allocation of capital. We also believe that the disclosure of our Non-GAAP Gross Profit, Non-GAAP Gross Margin, Non-GAAP Gross Profit for our SaaS business segment, Non-GAAP Gross Profit for our CPaaS business segment, Non-GAAP Gross Margin for our SaaS business segment, Non-GAAP Gross Margin for our CPaaS business segment, EBITDA, Normalized EBITDA and Non-GAAP Operating Cash Flow provides useful supplemental information to investors and financial analysts and other interested parties in their review of our operating performance. Potential investors should not rely on information not recognized under IFRS as a substitute for the IFRS measures of earnings, cash flows or profit (loss) in making an investment decision.
The following table shows the reconciliation for our consolidated Non-GAAP Gross Profit and consolidated Non-GAAP Gross Margin:
(1) We calculate Non-GAAP Gross Profit as gross profit plus amortization of intangible assets acquired from business combinations.
The following tables shows the reconciliation for the Non-GAAP Gross Profit and Non-GAAP Gross Margin for our SaaS and CPaaS business segments:
(1) We calculate Non-GAAP Gross Profit for our SaaS business segment as gross profit for our SaaS business segment plus amortization of intangible assets acquired from business combinations for our SaaS business segment.
(1) We calculate Non-GAAP Gross Profit for our CPaaS business segment as gross profit for our CPaaS business segment plus amortization of intangible assets acquired from business combinations for our CPaaS business segment.
The following table shows the reconciliation for our EBITDA and Normalized EBITDA:
(1) We calculate EBITDA as loss for the period adjusted by income tax and social contribution (current and deferred), financial expenses, net and depreciation.
The following table shows the reconciliation for our Non-GAAP Operating Cash Flow:
(1) We believe that Non-GAAP Operating Cash Flow is a good index to measure operational cash generation.
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