Company description

Tue, 19 Mar 2024 14:18:38 GMT

Zenvia Inc. develops a cloud-based platform that enables organizations to integrate several communication capabilities in Brazil, Mexico, and Argentina. It offers communication channels for businesses to engage or interact with their customers, such as SMS, Voice, WhatsApp, Facebook Instagram, Webchat, Messenger, rich communication service (RCS), and video; and communication solutions comprising SaaS for communication between businesses and end-consumers, such as marketing campaigns, sales teams' management, customer service and engagement, and customer success. The company also provides Zenvia Chat, a customer service platform that manages different communication channels in a single environment; Zenvia Message, a campaign manager to trigger RCS, SMS, and WhatsApp messages; Sirena, a solution for sales teams to communicate with customers through WhatsApp; and SenseData, a solution that uses advanced techniques to integrate and analyze large volumes of customer data, creating a unique 360º view of the customers and generating insights. In addition, it offers Zenvia Flow, a visual flow builder that allows customers to create communication and/or automation flows; Jornadas solution for enterprise clients to communicate with their customers through various digital channels and generate data-rich documents; and ALTU, the conversational automation solution for larger companies to solve their customer needs with automated yet humanized service through artificial intelligence. The company's platform assists customers in various use cases comprising marketing campaigns, customer acquisition, customer onboarding, warnings, customer services, fraud control, cross-selling and customer retention, ticket resolution, consumer health, and others. Zenvia Inc. was incorporated in 2020 and is based in São Paulo, Brazil.

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Sun, 03 Mar 2024 05:00:00 GMT

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Sun, 03 Mar 2024 05:00:00 GMT

Zenvia Inc. (ZENV) Note from GeoContributor Matt S.

This is a timely company to follow as it has resolved a funding issue and has significant (10x) opportunity to re-rate.

Note financials are in Brazilian currency (Reais) and it is a simple divide by 5 to = USD.

Zenvia is SAAS enterprise software business operating primarily in Brazil and other South American countries. Half of the business is a Customer service platform like Twilio (trades at 10x fwd EV/EBITDA) and the other half CRM like Salesforce (trades around 20x fwd EV/ EBITDA) to very much simplify. The company IPO'd near the peak of the market in July 2021 at $14 and peaked around $19. Bulge bracket firms Morgan Stanley and Goldman Sachs as well as Brazilian investment banks were involved. At that time SAAS companies had typical EV/Rev multiples exceeding 10x and Zenvia's was over 3x. Currently average trailing Ev/ Rev multiples are more like 5-6x.

Zenvia has a NTM EV/ Rev multiple of 0.95x (around 0.5x before adjustment for earnouts debt).

The opportunity exists because for the IPO, they had purchased and combined some new businesses and had earn-out arrangements to satisfy the vendors. The plan was to do a secondary to pay for these as they cropped up at higher prices. However, with the general market conditions changing in late 2021 and 2022, they did not / could not issue equity. They have slowly worked through improving the timing of earn-outs to match the business cash flow culminating in a recent announcement (link here). There was high risk prior to this and now I believe significantly less risk. The market has partially re-rated the company, but it is now a microcap, with low price $2 and been exited by the growth investors that invested at IPO. It will take time and results being announced for the market to fully appreciate the company again.

An analyst Ted Rosenthal has written up the company on SumZero and Value Investor Club prior to this restructuring which gives a much fuller background on the company. See a video discussion by Ted linked here. Twilio is a shareholder and does business with the company. It could acquire the business or increase its stake as some stage. There are a mix of other VC type investors including Tenscent still invested that may exit at much higher prices. Equity holders (before Bobsin placement) are at Section16 here

The catalyst announcement including 2024 EBITDA guidance of R$120-140m EBITDA (i.e. US$24-28m) is linked here and estimated Revenue around US$180m. This is EBITDA growth of over 60% on 2023 midpoint of R$80m. EV / EBITDA 2024 would be 6.5x for what looks to be a very high quality, high margin and growing company.

I have share count (A and B) at 41.9m plus the issue of 8.86m to Bobsin (below). Total of 51m say. But very little public float of around 11m shares.

Market Cap is US$105m (51m shares total A and B shares) plus straight debt of US$20m (converted to USD) repayable over 36 months plus earn-outs of up to US$45m payable (but some could be by shares rather than cash if company elects, so has financial flexibility.) Total Enterprise Value of US$170m.

As part of this announcement the founder CEO Cassio Bobsin invested US$10m in 8.86m Class A shares to assist the refinance terms. To me this is equivalent to a large insider buy and sign of his confidence in the business. He owns 38% of the shares including some as B (controlling class) shares that give him higher voting power. I've not done detailed due diligence on him, but he boot-strapped the company from his garage and stock compensation seems sensible if not modest in comparison to other SAAS

There are also promising business opportunities in generative A.I. and new plaforms like Google RCS rollout for those that want to dig deeper. The results in 2022 were focused on realigning the business for profitable growth as has happened with the industry in general.

Just by executing and paying down the earn-outs with cashflow over the next 3-4 years would see the share price double even with no multiple expansion. To me that is the downside and the upside is significant if the company just executes well so that analysts and investors regain confidence and re-rate the multiple to peers (whether 5x Rev or more).

My suggestion would be to read up the background and watch the next earnings report in mid March (date TBC).

Latest (Q3) results presentation and financials are here

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