Zenvia Inc: Brazil’s Customer eXperience SaaS play
“Most people overestimate what they can do in a year and underestimate what they can do in ten years” - Bill Gates
Investment Summary: Zenvia Inc (NASDA:ZENV) is Brazil based CPaaS (Communications Platform as a Service) and CX SaaS (Customer eXperience Software as a Service) Company, and its business focused in LATAM region. The company has done a series of acquisitions in the CPaaS and CX SaaS area during 2021 and 2022. The company faced headwinds due to high debt and slowing demand during 2022-2024 resulting in serious stock price correction. The company trades at ~130M$ (USD) valuation at $2.5/share. On January 13. 2025, Zenvia announced that the company is going to deleverage the balance sheet by selling it’s CPaaS business in the future, and reduced its workforce by 15% to further strengthen its bottom line. This is a right step towards de-leveraging the company and focus on high margin recurring CX SaaS business compared CPaaS. Considering its prospects and strong founder & CEO running the company, Zenvia can potentially deliver 6.5x investment return in the next 5 years.
Business & History
Zenvia Inc (NASDA:ZENV) is Brazil based software company catering primarily Brazil market and expanding into LATAM region. The company primarily operates in two business segments.
CPaaS (Communications Platform as a Service) - Enables enterprises to reach their customers through communication channels like SMS, Whatsapp, Email etc.
CX SaaS (Customer eXperience Software as a Service) - CX SaaS platforms to enrich customer experience, targeting small and medium scale enterprises.
Zenvia pivoted to expand its CX SaaS business by through the acquisitions, and it has done a series of acquisitions .
| Acquired Company | Year | Business Focus | Valuation | Notes |
|---|---|---|---|---|
| Movidesk | 2021 | Customer service platform | Not disclosed | Enhanced Zenvia's customer service offerings |
| SenseData | 2021 | Customer data platform | Not disclosed | Strengthened Zenvia's customer success solutions |
| D1 | 2022 | Mobile marketing platform | R$70 million | Expanded Zenvia's SMS marketing capabilities |
| Sirena | 2023 | WhatsApp business solution provider | US$13.3 million | Boosted Zenvia's WhatsApp-based communication tools |
After the acquisition , Zenvia worked to integrate these companies into a unified single platform and launched “Zenvia Customer Cloud” in Q4 2024. The unified Customer Cloud platform is expected to accelerate the revenue generation in the coming quarters.
2. Financial Health of the company
Zenvia paid only part payments for the companies during the time of the acquisition, and agreed to pay the rest later by raising additional capital. Zenvia got into financial troubles in 2022 as the acquisitions payment obligations came up and the funding environment dried up. The company had to do layoff and bring down the costs under control which lead to profitability in 2024.
Zenvia’s announcement on addressing funding gap in Feb 2024
Zenvia successfully pushed out the debt payment schedule after negotiating with the lenders and acquired company previous owners of Movidesk and D1. This debt restructuring provided much needed breathing room without that the stock might be staring at possible bankruptcy.
One key point is, Zenvia’s CEO Cassio Bobsin made a 50 Million R$ investment in February 2024 to address the funding gap which also reenforces the CEO’s belief in the company’s future prospects.
Source: Q3 2024 Zenvia’s earning release
The trade receivables are at 195 Million R$ (Brazil Reais) whereas Trade payables are at 437 Million R$. Similarly debt obligations and earn-out payments amounting to ~397 Million R$ when compared to the cash on books 102 Million R$. There could be issues with the funding gap if the company has issue in generating operating cash flows in the coming quarters.
Unlike US, Brazil is a high inflation economy and the interest rates are >18% on Zenvia’s debt which is a huge burden in terms of the interest expenses.
Zenvia’s announcement on CPaaS business on Jan 13, 2025: In a step towards de-lever the balance sheet, Zenvia to sell its CPaaS business and use its proceeds to fulfill its debt obligations. Zenvia also announced another 15% layoff to further streamline operations and reduce expenses.
3. Business Parameters
| Business Parameter | Value | Comments |
|---|---|---|
| Market Cap | $ 127 M | At share price $2.45, market cap is $127 M |
| Enterprise Value | ~$ 196 M | Including 66M $ of earn-out payments |
| Debt Cash Net Debt |
~$ 66M Earnout, ~$18 M Debt ~17.5M Cash $130M |
The debt rates in Brazil are high >18% |
| Revenue Growth (1, 3, 5 Years) | 23%, 19% , NA | The revenue growth slowed during 2022 and 2023 due to high interest environment |
| Operating Income (EBIT) in 2024 | $ 7.8M | |
| Cash from operations in 2024 | $ 14M | |
| Non-GAAP Gross Margin | 40.7% (9M 2024) | SaaS - 56%, CPaaS 33% |
4. Management
Zenvia Inc was founded by Cassio Bosin in 2003 from a garage, and the initial focus of the company was to enable enterprise communication with its customers. Over the years the company cemented its position in Brazil’s CPaaS market, and its a dominant player today. Cassio still holds 37% of the ownership in the company and runs the operations of Zenvia as CEO. Oria Capital, a VC firm, owns 27.2% in Zenvia. Twilio and Tencent companies together own 14.1% in Zenvia [article].
CPaaS business is cyclical in nature, and faces headwinds during economically challenging environment. In 2021, Zenvia has embarked on a journey to acquire companies to expand its SaaS and CPaaS offering.
In my view, the company over paid for these acqusitions as the valuations of the software companies were high during 2021 and 2022.
The second big mistake by the management was the funding needed to close these acquisitions were NOT fully closed. The management was hoping to raise additional funds in the year 2023, but the captial markets suddenly turned dry, and Zenvia started facing headwinds in its business revenues as well.
Investors were worried as Zenvia was starring at bankruptcy due to the funding gap to fulfill its debut obligations. This lead to share price crashing from the highs of $19/share to <1$/share.
Mostly every management makes mistake during business operations, and its important to see how they learn from their mistakes. The management successfully pivoted to reducing OpEx by reducing workforce, and negotiated with its debt obligations. During 3Q 2024, the company generated 10M$ of Cash from CFO (Cash From Operations). Though there is a one time CPaaS revenue opportunity during the quarter resulted in the increased CFO, it also indicates the management’s abilities in successfully steering the company during tough times.
5. Company Focus
From 3Q 2024 presentation
Currently CPaaS and SaaS segments provide 67% and 33% revenues as the company started accepting low-margin contract in the recent quarters. In the long run SaaS to take more revenue share as the management announced to de-merge its business.
Zenvia One Cloud to contribute to significant revenue growth in the coming quarters as the company brought the various solutions from its acquisitions under one platform.
Zenvia solutions focus starting from lead generation, sale conversion and customer support.
AI Chatbot: Zenvia enables enterprises to launch customized chatbots to engage with customers and enable faster support.
Customer engagement and experience solutions based on WhatsApp, SMS, Emails etc.
Geographical Expansion into Mexico and Argentina: The company is planning its business into Mexico and Argentina countries. Currently the revenue from these two countries is insignificant.
6. SaaS Landscape in Brazil and LATAM
SaaS overall market in Brazil is projected to reach US$2.72bn in 2025 and growth at the rate (CAGR 2025-2029) of 20.58%, resulting in a market volume of US$5.75bn by 2029 as per Statistia’s forecast. Digital transformation within the enterprises resulting in this strong growth. Brazil’s GDP growth is expected to be in 2-3% range in the near future.
SaaS is a very large market, and Zenvia plays in CX SaaS segment within SaaS.
Key Takeaways:
The Brazilian market for CX SaaS platforms is poised for substantial growth.
Enterprises are prioritizing omnichannel experiences, personalization, automation, and data-driven insights.
Companies like Zenvia, with their focus on integrated CX solutions, are well-positioned to capitalize on this trend
SaaS market in Latin America is expected to grow 12.5% CAGR from 2025 to 2030. Currently Zenvia’s revenues primarily come from Brazil, and the company is expanding its business to Mexico and Argentina as well.
Competition:
Zenvia is the market leader in terms of its CPaaS platform offering. Zenvia is expanding it revenue with its CX SaaS offering ‘Zenvia Customer Cloud’. Zenvia offers comprehensive CPaaS platform. Especially strong after acquiring Sirena, boosting their WhatsApp business solutions. A good choice if one prioritize omnichannel communication and WhatsApp integration.
Zenvia focusses on Small & Medium scale companies whereas the incumbent companies like focus primarily on the large scale companies. In terms of CX SaaS ratings, Zenvia comes after competitors Hi Platform, Movile.
7. Risks
Not meeting debt obligations: The debt restructuring in Feb 2024 provides good visibility in terms Zenvia’s ability to handle debt payments. If the economic situation worsens, the debt obligations could become an issue.
Zenvia not able to develop competitive solutions: Zenvia operates in the highly competitive environment. Zenvia has to keep up the pace and deliver the differentiated solutions in the coming years to maintain/grow its revenue share. Otherwise the revenue growth can be disrupted by competition.
Brazil’s economy slows down: Brazil economy is expected to grow around 3%, inflation is coming down due to monetary tightening, and the unemployment rate is around 6%. Any further slowdown in the economy might hurt Zenvia’s growth plans.
Brazil Real depreciation: Brazil Real depreciated by ~150% in the past 10 years (8.5% per year). As Zenvia revenues and operations are in Brazil, the stock price appreciation gets impacted due to the depreciating Brazil Real. If Brazil Real depreciates faster it adversely effects the returns in USD.
Based on data from sources like the Central Bank of Brazil and FRED (Federal Reserve Economic Data), the BRL/USD exchange rate was roughly around 2.35 BRL per USD in early 2015. As of today, February 1, 2025, the exchange rate is approximately 5.85 BRL per USD.
8. Return Expectations
| Scenario | Probability | Expected Growth Rates | Returns in the next 5 years |
|---|---|---|---|
| Best | 35% | Expect 30M $ from CFO in 2025, and 20% growth rate | 6.5x (~85M$ from CFO, 20x multiple $1700 M in marketcap, after considering Forex deprication the marketcap would be ~$850M ) |
| Average | 45% | Expect 25M $ from CFO in 2025, and 15% growth rate | 2.9x (~50M$ from CFO, 15x multiple $750M in marketcap, after considering Forex deprication the marketcap would be ~$375M ) |
| Worst | 20% | Expect 25M $ from CFO in 2025, and 12% growth rate technology) | 1.7x (~42M$ from CFO, 10x multiple = 420M$ in the marketcap), after considering Forex deprication the marketcap would be ~$210M) |
Acknowledgements: Thanks to Ted Rosenthal of TMR Capital for pitching Zenvia investment opportunity initially in 2024, and the interview can be found on Youtube (https://www.youtube.com/watch?v=vQgS76t7Gxk&t=142s).
References:
Zenvia’s announcement on addressing funding gap in Feb 2024.
Zenvia announces new strategic cycle to focus on SaaS products.
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