NVNI

Good morning, ladies and gentlemen, and welcome to the Nvni Group Limited Investor Webinar. A slide presentation is accompanying today's webcast, and there will be an opportunity for you to ask questions at the end of today's presentation. Please note that today's webinar is being recorded. As a reminder, all participants will be in a listen-only mode. I would now like to turn the call over to Mr. Pierre Schurmann, Founder and CEO, and Gustavo Usero, COO. Pierre, please go ahead, sir.

Thank you, Sophie. Good afternoon, everyone. Before we get started, I just wanted to go over safe harbor statements. This presentation includes forward-looking statements. These are based on current expectations and assumptions and involve risks and uncertainties. Actual results may differ materially. We undertake no obligation to update these statements except as required by law. Please refer to our SEC filings for more information on risk factors. As we look into this year, before we start into the financials, as we reflect on the first half of 2025, I want to highlight the two strategic pillars that have guided our execution. First, increasing cash flow generation and operational efficiency through AI-driven initiatives. Second, preparing the company to scale through new acquisitions. We're doing that by proactively accelerating our pipeline and amplifying our funding optionality. These priorities have shaped our trajectory this month so far, and the results demonstrate solid progress.

To talk about our AI initiatives and their impact on cash flow, I'd like to invite Gustavo Usero, our COO, to take over the call.

Thank you, Pierre. Good morning, everyone. I'm Gustavo Usero, COO at Nvni Group Limited. Before we begin, let me briefly share my journey with you. In 2014, I founded a software company in Brazil and later expanded to Latin America. In 2018, I sold the business through a French group where I became one of the main shareholders and served as a key executive for the company. A few years later, in 2022, we sold the group to Constellation Software, and I stayed at Constellation for almost three years, holding several senior roles in the company and gaining valuable experiences during this time at the company. Next slide, please. At Nvni Group Limited, we are focused on increasing efficiency within our portfolio companies and driving AI initiatives in different fronts to result in lean, agile, and AI-driven operations.

In the first half of the year, we unlocked R$5.2 million in cost savings through automation, infrastructure optimization, and AI-powered services, while reducing the total headcount by 15%. We also established the foundation for an additional R$12 million in savings over the next 12 months. Next slide, please. I'm pleased to share the progress of Nvni AI Labs, the umbrella for group AI initiatives designed to generate efficiencies and boost free cash flow generation. The R$5.2 million in cost savings with AI represents the equivalent of 50% of all free cash flow generated in 2024, highlighting the importance of the initiative. Since the start of the month, we've moved most of our engineers to working exclusively with Claude Code. The results have been very positive so far. On average, productivity increased by 40%, and for some of the tasks, the performance has improved by as much as eightfold.

Next slide, please. We launched Nvni AI Prize that resulted in three new AI-first products that are already generating incremental revenue for our group, and we will continue to contribute with relevant additional revenue over the next 12 months. The internal program was so successful that we are running a second edition, but now open to all B2B SaaS companies in Brazil, positioning Nvni Group Limited as a leader for AI-based transformation in the region. Next slide, please. As we can only improve what we can measure, we created the Nvni AI Index to track AI adoption across our portfolio companies and M&A targets. It benchmarks AI maturity, identifies opportunities, and aligns leadership around a clear AI strategy. The index is also a practical tool for evaluating acquisitions, accelerating integration, and ensuring every decision is guided by data, proven strategies, and concrete insights.

We are implementing Salesforce across all our portfolio companies, and this quarter, we will begin to roll out AI-enabled cross-selling using Salesforce AI solutions. Now, I'd like to hand the presentation back to Pierre to continue.

Thank you, Gustavo. As you can see, bringing Gustavo on board as COO has allowed us to implement the AI strategies that have already shown results and will make future acquisition targets even more accretive. I'd like to remind you that this was only started mid-Q2, so we're really just getting started. Now to our second focus, scaling and funding. I personally invested a substantial amount of my time expanding our optionality and accessing capital, talking to over 50 institutional investors in this first half of the year. We have shifted from an equity-based financing to debt, not convertible debt, debt, such as Constellation Software, Vitech, and Roper have done for over 30 years. Current U.S. debt options will allow us to execute our pipeline accretively while allowing us to also avoid further shareholder dilution. Also, we have been far more proactive in building our pipeline, and the numbers show.

Yesterday, we updated our deck, and it shows that we have doubled the total volume of deal flow. Not only that, but we have also been able to find much better accretive targets with an average EBITDA of 46%. This morning, we announced the signing of a binding term sheet to acquire MCA Solutions, the leading ERP provider for internet service providers in Brazil. This acquisition, expected to close within 60 days, should contribute approximately R$40 million in pro forma annual revenue and R$20 million in pro forma EBITDA to Nvni Group Limited. This represents a 20% top line growth and a 47% increase in EBITDA. That's substantial. It's also important to note that we were able to acquire this company at a little bit over 3.5 times EBITDA. It shows the capability of us executing on a very accretive pipeline with highly qualified companies at very low multiples.

Looking ahead, we remain on track to meet our strategic growth targets, including the completion of another two acquisitions by year-end. These acquisitions are part of our broader plan to scale our platform, expand capabilities, and enhance value delivery to our customers and our shareholders. I will now turn to our key financials. Our key financial metric, operating free cash flow, because that's the field that allows us to acquire more companies and service that as we grow, grew by 16% this first half, way above the top line growth of 6%, demonstrating our ability to create value from our companies. In line with our portfolio optimization guidelines, we executed strategic divestitures during the first half. The specific consolidation we did was our equity position on SmartNX, resulting in the one-time loss that you will see in the result.

This was a deliberate decision to sharpen our focus on higher performing assets and long-term cash flow generating business, as seen by the results. Our adjusted EBITDA for the first half was $21 million, representing a 20% decline compared to the same period last year. While the decline was primarily related to optimization efforts, the immediate increase in cash flow generation demonstrates that we're focused more than ever on our main financial milestone. Now turning to our broader financial performance. Net revenue reached $98.2 million, a 6.5% increase compared to the first half of 2024. We're affecting customer base growth and retention, fundamental metrics for SaaS companies. Revenue recurrence reached 92.2%, reinforcing the predictability and scalability of our businesses. Churn decreased to 2.4% a year. That's a 14% improvement compared to the first half of 2024, which reflects improved customer engagement and satisfaction.

LTV/CAC ratio, also a very important metric for SaaS businesses, has improved to eight times from six times, demonstrating more efficient customer acquisition and retention. Net cash from operating activities showed an outflow of $32.3 million, primarily reflecting the investments, as well as foreign exchange impacts from our reals appreciation against the dollar. We remain focused on delivering operational efficiency and positioning for long-term success. The strategic decisions made during the first half positioned us to benefit from our transformative initiatives going forward. We will continue investing in AI-driven solutions and platform enhancements aimed at delivering value to our customers and shareholders. With that, I'll turn it over to the operator to proceed with the Q&A portion of our call.

Thank you. We will now begin the Q&A session for investors and analysts. Turning to questions from the audience, if you wish to ask a question, please press the raise hand button. If your question has already been answered, you can leave the queue by clicking on put hand down. There's also the option to ask your question through the Q&A icon at the bottom of the screen. You may select the icon and type your question, including your name and company. Written questions that are not addressed during the earnings call will be responded by the investor relations team. Please hold while we poll for questions. We will now answer the following pre-submitted questions from the audience. The first one, how do you plan to fund future acquisitions?

Sure, I can answer that one. We are now in a situation, in a condition where we're generating more cash than ever, and we expect to continue improving cash generation margins within the companies that we have and the companies we acquire, partly as a result of our AI implementation and of Gustavo's extensive experience and playbook in doing this while at his former company. Our focus will be on raising debt, straight debt. We have seen interesting access to capital markets in the U.S., and that's how we expect to fund the next few acquisitions. After that, the cash flow for the businesses should be enough to allow us to keep the flywheel going.

Thank you. The next question, do you plan to divest any other companies?

No. We made a specific divestment because we are, again, we are focused on cash flow generation, and the businesses that we have today in the portfolio are doing extremely well, as the numbers show. We do not plan to divest any businesses that we have or that we have in the portfolio today.

Next question, what impact does the historically high interest rate have on Nvni companies?

The Brazilian interest rate is at 15%. It's the highest it's been since 2002, and that actually has a very positive impact for us because multiples have come down substantially. We saw average multiples two years ago at 10-13 times EV/EBITDA, and we are now seeing multiples as low as 3.5 times. It's actually been a boom for us to be able to raise capital in the U.S., U.S. interest rates, and allocate the capital in Brazil, given the optionality that we have. The businesses themselves have not seen any difference. They keep growing, and we don't foresee any adjustments needed on projections for the business moving forward.

Thank you. Please hold while we poll for questions. Our next question from Derek Greenberg with Maxim Group, which company did you divest?

As I mentioned earlier, it was SmartNX.

Please hold while we poll for questions. Next question, also from Derek with Maxim Group, discuss how you are implementing AI and impact on the company.

I'll let Gustavo answer that one.

For the AI implementations, we are implementing it in customer support, sales, and also in software development, but we are also implementing that in the financial workflows within the operations. By implementing AI in sales, support, software development, and also the financial aspects, we're going to place the company in a very good position in the digital transformation in Brazil through AI, and of course, increasing our free cash flow. That is the main focus that we have in the company.

Please hold while we poll for questions. Next question, when can we expect the new companies to be acquired?

As we mentioned, we have a very extensive pipeline with a lot of optionality. We're in due diligence with four companies right now, apart from the one that we just mentioned that we're closing on. Obviously, or ideally, we'd like to close all of them within the quarter, within this quarter, so within this year. We still project to have four acquisitions within the year.

Please hold while we poll for questions. Next question, discuss cross-selling synergies between your operating companies.

I can answer this one. When we acquire a company and we're bringing the company to our portfolio, one of the main advantages we have is to be able to leverage the network we already have from customers and to sell more to the existing network. With that in mind, we are applying Salesforce across the whole portfolio company. All the companies in the group are going to use Salesforce, and with so, all the companies will be able to access our portfolio of customers and sell more to the same basis that we have. We are not only expanding sales to new regions and also new customers, but we are selling more to the existing basis that we have.

Thank you very much. This concludes the question and answer section. At this time, I would like to turn the floor back to Pierre for concluding remarks.

Thank you, Sophia. Thank you, everyone, for being with us on the call today. As we mentioned, if you have additional questions, they will be answered individually. We're looking forward to a very exciting and interesting remainder of the year. There's a lot to be done, but we do believe we have the execution capability to deliver what we promised at the beginning of the year. Thank you.

Thank you. This concludes today's presentation. You may disconnect now and have a nice day.