Next up, we have Nvni Group Ltd. With me today, I have Pierre Schurmann. He's the founder and CEO. This will be conducted as a presentation followed by Q&A. If you would like to submit a question, you can do so in the Q&A function at the bottom of your screen. With that, I'm happy to hand it over to you, Pierre.
Thank you, Angela. And thank you for all of you participating in this call this morning. Great opportunity to share a little bit about my story and about Nvni and where we're at and where we believe we could go. I'll go ahead and put the live presentation in a second. I just wanted to give you some context, which I believe is important. Prior to founding Nvni, I have been an entrepreneur since 1996. I founded Brazil's second largest search engine, sold it to a U.S.-listed company called Star Media at the time. Most recently, in 2011, I founded a VC fund called Bossa Nova.
Now it's called Bossa Invest, which has been for the past eight years the most active VC in Latin America and is actually one of the top most active VCs in the world outside of the United States, according to PitchBook. On that company and that VC, I was a managing partner. I made over 800 investments, had over 100 exits, all in B2B companies, all in Brazil. That is why Nvni started acquiring companies in Brazil, is because I had extensive experience in the local market, investing in companies in that market. I'll go ahead and share my screen. Okay.
Do we need a full screen?
Can you see the full screen? No.
No.
Now? Now?
Now we do.
All right. Perfect. Here we go. Give me one second here to adjust here. All right. Subtitles should not be there, but one second. There you go. Perfect. Again, good morning, everyone. Nvni is a Brazilian-based serial acquirer, and I will go through a presentation here. I will go a little bit over our company, our investment thesis, the Latin market, and Latin-Brazilian SaaS market, a little bit of an overview and track record, pipeline, and our defined growth initiatives, and comp and team. Basically, we acquire either 100% or are on a path to 100% multi-sector SaaS B2B businesses in a very similar way to what Constellation Software has been doing for almost 30 years. Vitec has been doing for almost 30 years in different regions.
These are companies that are profitable, growing, and cash flow generating, every single one of them and every single one of the companies we're looking at in Latin America. Our targets are niche-leading SaaS companies. I'll give some examples down the road with established business models. They are not startups. They are not in extremely fast growth pace, but they are very predictable and very strong cash generators. We are different because we are focused on Latin America, exiting a market that is under-targeted with interesting capital efficiency. Big numbers, this is in BRL. If you divide it by 5.5, you come to dollars. We have 20,000 customers. No customer represents more than 0.25% of our revenue. Our organic growth last year was close to 14%. Our EBITDA margin at 26% with a 30% growth. EBITDA has been growing. I'll give some more details on that.
Today, we have seven companies in portfolio. I'll go a little bit over that shortly also. Our investment thesis is that we're focused on a sizable, addressable market position as an M&A platform, only M&A platform focused in SaaS in Latin America right now, with a multiple vertical portfolio already in place and ready to scale the platform, supported by our value creation strategy. Our team has been around since day one. We have an experienced team not only in Nvni, but through other businesses they ran or supported. We have a really interesting pipeline for M&A. Latin America SaaS IT market, software market in general, is today a $9.2 billion market, growing at an interesting pace. By 2030, it'll double. Latin America in total is $21 billion.
They're growing at a pace that's faster than the rest of the world because it's an underserved market. The companies that we acquire are usually bringing in clients that are migrating from an Excel spreadsheet or a notebook into a SaaS B2B app. Brazil, obviously, is the big contender, but there's interesting opportunities in different markets. As I mentioned, the revenue from SaaS in Latin America should double between $9 billion last year and $19 billion. It's a thriving market, a lot of market penetration, a lot of blue ocean here. The companies we're looking at are effectively impacting and gaining market share in this growth. A little bit of our companies. I'll give you two examples of companies we acquired.
Effecti is the leading ERP that connects small, medium, and some large businesses, but mostly medium businesses, to federal, state, and local government auctions. When the government in Brazil wants to sell, they plug into an online platform, government platform, and anyone can sell to the Brazilian government at a state, local, and federal level, but it is a complex process. It requires bidding. There are bids. Effecti connects small businesses, like for example, a cup manufacturer, and allows them to sell through the government in a transparent and a direct and an automated way. Last year alone, through Effecti, small and medium businesses sold $ 13.13 billion to the Brazilian government. They are absolute leaders in this segment. A second company here as an example is ssOtica. They are the leading ERP for eyeglass shops in Brazil. They have 34% market share in Brazil, different than the U.S.
There are no big chains. The big chains represent about 15%-20% of the market. It is mostly mom-and-pop shops. ssOtica is an ERP that does full service from the acquisition of eyeglasses to the customer service to the shop management for these mom-and-pop shops in Brazil. There are about 60,000 of them. It is a very consistent cash flow generator and absolute leader in their markets. There are other companies in different segments. I will not go into everyone because our time is limited. As far as financials, we have been growing consistently over the past years. Especially, I note that our gross profit has increased at a good pace and our EBITDA margin has expanded because that is part of our value creation strategy, right?
Obviously, top-line growth is important, although Constellation and Vitec, which are kind of our comps, grow at 1%-2% annual organic growth. We are growing about 15%, 14%. Margin expansion is important because we use the cash flow from the businesses to acquire new businesses. If you look at the chart here, when we are talking about EBITDA, the first two years, there were a few companies in Nvni and we have been able to expand margins quite a bit, taking EBITDA from doubling the EBITDA margin over the past from 2022- 2024. That is work of development. That is a result of value creation we do within these companies. Big numbers, we filed about 15 days ago. We turned our first operating profit since we started the company. I just looked at EBITDA, up 30%.
Net cash has increased substantially also because we're looking in ways to better expand margins within these businesses. I'll go over to our value proposition for investors is to give investors access to profitable SaaS B2B companies throughout Latin America, starting with Brazil, have access to a diversified portfolio of cash generating and fast-growing companies or growing companies, if you may. We are segment agnostic. We're not a roll-up. We're not buying all ERPs or all software companies for the eyeglass shop market, for example. We're agnostic because our main driver for a decision on an acquisition is what is the predictability, what is the diversification, and how consistent is this revenue. We have 92% recurring revenue. Out of all the 24,000 clients we have, no client represents more than 0.24% of revenue. It's very diversified, very consistent, and very predictable.
That's why we acquire these types of companies and we'll continue to acquire them, being agnostic in segment. That's how we look at these companies. That's how we believe we generate value for our investors. For our founders, we support these founders who have profitable companies. You may ask yourself, why would someone sell a profitable company? Simply because they've been running these companies for 10- 15 years, making money, but they really haven't captured the lion's share of the value for building and enduring to build a sustainable business. We are the alternative for selling. There are obviously other alternatives, but we do this in a very different way. We don't fire anyone. We don't hire anyone. We're not a private equity firm that's going to come in and slash costs.
All these margin expansions have maintained most of the team, all of the teams of the company, the founders of the management. We are able to do that, to create value through different ways that are valuable for founders, right? These companies are all founder-based and first-time founders, most of them. The founders see them as their baby, their creation. Having been a founder myself, and I am still a founder here in Nvni, but now as an acquirer and investor, I really relate to that. I believe they understand and relate to that also. Talk a little bit about pipeline. Different than the U.S., which is a very competitive market. In Brazil right now, interest rates are at their highest rate since 2006. They are at 14.5%.
They're about to go up another half a point or maybe a full point to the highest, I believe, since like 2001. That creates a lack of liquidity. Also, since 2021, there has been no IPOs in the Brazilian stock market. Now talking about tech, there's no IPOs in the Brazilian stock market. Over 10 companies have delisted. We have a negative stock market in Brazil. It's a really unique situation. There's no horizon. There's no short-term horizon for IPOs in Brazil, let alone for software company IPOs. That creates a unique opportunity for us to acquire, which was very similar to what the market was when I started Nvni back in 2019. Our acquisition criteria, as I mentioned a little bit, is SaaS B2B. They're not on-premise. They're real SaaS companies. Recurring revenue, as I mentioned. Think about something like OpenAPI.
There is a monthly billing on it. Low attrition, low churn, positive cash flow. Our companies are within the rule of 40. If you look at SaaS, they are all within the rule of 40. Very good leaders that have founded solid companies and been doing that for quite some time. The leaders stay on board for the companies through the earnouts. We help them build management to keep running the companies. With an annual target revenue of BRL 10 million-BRL 30 million, so anywhere between $2 million and $5 million, $6 million in revenue, we are acquiring companies that are pretty much the same size. That allows us to diversify the risk. There are very interesting acquisition opportunities at higher revenues and EBITDA and cash flow.
We're very disciplined to continue to acquire companies within this spectrum to ensure we're diversifying risk and not concentrating in any specific sector. Sorry, the way we acquire companies is through a mix of cash. That cash could be from cash flow of the companies, cash in the company, or debt that we raise through seller notes. When the stock is at a price that makes sense, through stock. The mix of all three. Our main driver and decision is we have an internal hurdle rate of 31% IRR. If the company passes that hurdle rate, then we try to understand what's the best mix that allows us to improve that and to keep allocating the capital that we raise. Our playbook post-acquisition, as I mentioned a little bit, is pretty straightforward. The founders are very good at building companies, focusing on strategy, focusing on growth.
Then on one end, we work together with them and bring some advisors to help them continue to do that. I'd say on the other, so a lot of autonomy there. On the other end of the autonomy range, we've been audited since day one. We're on to the Grant Thornton. We run Oracle as part of our reporting system. We are very rigid with things that are governance-based and that allow us to report as a listed company and allow us to have consistency on the information that we have. When you look at people, we help with talent acquisition. We bring in playbooks that allow the companies to reduce employee churn. I believe that that's been an important part of the value creation that we have been able to do so far.
As I mentioned in the beginning, to give you an idea of comps, if you look at the comps that are in the market, they're much bigger than us. We're very much at the starting of Nvni here. If you also look at the multiples, we're extremely discounted compared to these comps. Obviously, we have a long way to go, a lot of work to do, very much focused on growing the business on the long term. Part of that is done because we have an incredible pipeline. I spoke personally to over 2,500 companies since I founded Nvni. Because of my previous life, if you may, as a founder and as an investor of many, many SaaS companies, that gives us a really privileged pipeline. Today, we have 29 companies that are qualified and analyzed.
That means that we know what we would pay for them if we were to acquire them today that have $100 million in revenue and $32 million in EBITDA. More importantly, we have deals in negotiation, which are in different stages of closing, of $37 million in revenue and $19 million in EBITDA. As you may notice, you probably will notice is that the EBITDA margins of the companies we're talking to now is higher than ours because we're raising the bar. We were used to acquire companies with lower EBITDA margins. Now we have optionality. We're working and focusing on acquiring companies that have higher EBITDA margin and are converting that EBITDA into cash, right? We have a 72% conversion ratio from EBITDA to cash. This is not inflated EBITDA.
This EBITDA turns into cash because that's really important because it's an important milestone KPI for us. That's what we have on right now. Obviously, we wouldn't be able to do that if we didn't have a great team. Apart from myself, my co-founder has over 20 years' experience as an operator of different tech companies as an investor also. We have a management board that has different experiences. Scott Klossner has experience with private and public tech companies. Marcello Gonçalves is the managing partner of Domo. Domo is the number two VC in Latin America right now. Bossa Invest is still the number one. I'm no longer in Bossa Invest since 2019. Marcelo has a very interesting view into the current market conditions for tech and investments. Marco Leone was until recently this year, Latin America Vice President for OpenText.
Prior to that, he ran Computer Associates and has a lot of enterprise sales experience. João Leite was CTO for Itaú for almost 20 years. Itaú was the largest private bank in Latin America. We have a different board with complementary experience that is part of the decision process, not only to analyze companies, but to help implement growth strategies as we go along. That is basically it. Thank you very much for your time. Now I'll open to Q&A.
Thank you, Pierre. That was a really good overview. For the audience, if you would like to participate in the Q&A, you can submit your question in the Q&A function at the bottom of your screen. We have a couple here already populated. For the year, you did one acquisition out of four that you are planning. Are those sort of planned already?
Are you working on those? When can we expect those to close?
On the letter that I put out at the beginning of the month, I shared that information. We have three deals in closing right now. We have the pipeline that I mentioned earlier. We have a total of $32 million in revenue and $19 million in EBITDA that are in different stages of closing.
Okay. You are planning four deals this year. Is that sort of the pace you are going to keep in the coming years, or?
Nvni itself, when we talk about acquisitions, Nvni acquires companies directly. Our companies will acquire companies also. Although we will not acquire all the eyeglass shop ERPs, all the software companies, our company could do that. When we say four to six, we are talking about, I would say, almost like the divisions that will become divisions over time. Our companies are looking into other opportunities, which I do not have visible or could not detail right now.
Okay. Another question here. What multiples are you paying for acquisitions? Are they typically all cash deals?
I can give a range. We pay anywhere between 4x-6x EBITDA for acquisitions. The deals, as I mentioned in the presentation, depends. They vary. Right now, we will not use stock because it will be dilutive. I do not want to, as the largest shareholder in Nvni, I am very skin in the game. I do not want to dilute everyone along with me. We use cash or seller notes. That is how we have structured these deals. Usually with a bonus or an earnout to incentivize founders to keep performing for three to four years.
Okay. Another question here is, what's the average interest rate of the debt that you currently carry?
14.5%.
Okay. Another question here. You have done well expanding the EBITDA margins. Is there further upside from where they are currently, or?
I believe there's a possibility of expanding EBITDA. That has come primarily due to, I'd say, a new factor or a new fact, which is AI. I don't like to talk about AI because a lot of people just oversell AI so much. There's definitely some efficiencies that we could bring to customer service, to sales that should have some impact in the business. Also, we should be able to actively start doing cross-sales, which prior to being able to do our own data set and LLM, were very costly and ineffective. I believe we should be able to continue to expand margins. I believe so. Again, can't promise in just a.
Okay. We talked about this before the presentation about your reporting. Now you report on an annual basis, but you know that that's going to change. Just let me repeat that with investors.
As a foreign private issuer and as an emerging growth company in Nasdaq, we're only required to report annually. We spent a year trying to get our gears in place here. We just reported full 2024. Our intention is, and we will report first half of 2025, and then at the year-end, full 2025, or beginning of 2026, full 2025. After that, we will scale up to report quarterly.
Okay. Another question here is, what would you say to current shareholders that is concerns about current share price and Nasdaq compliance?
There are two parts to it. I think Nasdaq compliance due to the share price gives us until October 18th for us to reach at least $1. Historically, we've had the same challenge last year, and we were able to surpass it. We'll keep on working. I can't talk about stock price, obviously, but it's not my place. We'll keep on working to deliver value. Hopefully, the market will understand that. As I just showed in our presentation, we're severely discounted to our peers. Hopefully, the market understands that. Investors understand that. They come on board, and we work together to get there.
Okay. Are your acquisition targets exclusive negotiations, or are they deals that are being shopped around?
Exclusive negotiations. Every single deal that we're talking is an exclusive negotiation.
Okay. You sort of touched on this, when your next acquisition might take place and when we expect to hear news about it.
Unfortunately, I can't share that. We do have, as I mentioned, and I believe I said in the letter, we have three deals in closing status, so ongoing closing.
Yeah. Another question here. Okay. That one was deleted. Why are the multiples you pay so low for such high-margin cash flow companies? It's another question here.
Because if you look at the Brazilian stock market and you look where interest rates are in Brazil, the leading tech companies in Brazil listed are trading at 9x EV/EBITDA. That is why. If a listed company, the leading company in Brazil called TOTVS is trading 12x EV/EBITDA. Cost of capital is high. That is basically why. That is exactly why we listed in the U.S. because we can arbitrage that difference.
Okay. If you would like to participate, you can submit your question in the Q&A function at the bottom of your screen. For the acquisitions you make, do you have financial targets that you target to reach within a year or so, or?
I can't disclose future projections. Again, we're looking at companies doing anywhere between $2 million and $7 million. That's as far as I can go.
Okay. In terms of the macro environment, how is that playing into sort of your strategy?
My macro environment, U.S. macro environment or Brazilian?
Yeah, both U.S. and the Brazilian, I guess.
Right. In the beginning of the year, I would say that the question was only addressed to the Brazilian macro environment, which is kind of stable. Curiously enough, now it became addressed to the U.S. market, which in January, I thought was unthinkable. We're very comfortable given that if you look at the persistent cash flow that we generated last year and what we've been able to do historically, we understand that over time, markets will understand and recognize what we're doing. On the buy side, obviously, the instability, if there were to be instability in local markets in Brazil, that would actually create a greater opportunity for us to acquire more companies and better structures.
Okay. Another question here is, would you consider making larger acquisitions if they make sense and are attractively priced?
Right now, no, simply because where we're at, we're able to do more acquisitions of smaller companies in different segments and diversify risk. The temptation to do, we've seen great deals of companies that are doing $40 million-$50 million-$60 million in revenue, but it would concentrate too much risk. Probably if we continue to execute and we continue in our execution line, if you draw a line there, probably by the end of next year, we will be able to acquire larger companies. We started acquiring smaller companies. Over time, we'll acquire medium companies. Eventually, we'll have the problem that Constellation has, which is they have $2.8 billion in the bank, and they have to allocate that capital. We're not there yet. Right now, we're very disciplined in acquiring smaller companies.
Okay. Another question here. You said cash or seller notes will be the form of capital you use. How much cash is currently on hand?
We just disclosed cash on hand on our filing 15 days ago.
Okay. We have one last question here. What do you feel the market is missing in terms of understanding your story?
I think there's three things. First, we didn't get visibility in numbers. We're late in filing. That obviously didn't give visibility. That's obviously an important part. Second is that some people do not understand Constellation Software, Vitec, Roper, and Tiny, which is a Canadian company that's very similar to ours. They think we're a software company and we're actually capital allocators. If you look at the historical trajectory of those companies, and if you believe that we should be able to execute like that, we are undervalued. We are undervalued compared to those comps. Third, until January, we didn't really have, we weren't participating in events. We were outpaced. We weren't telling our story. We had a very low volume. In December, November, we had an average of 10,000 shares traded. We started going out and talking to markets and talking to investors.
Like, I'm here and grateful to be here today. That gives investors more visibility of our story and what we're doing. Hopefully, over time, if we're able to continue to execute as we believe we will, that will give them understanding of where we're at.
Okay. It seems like it's a good story. I'm looking forward to following it. Time is kind of up. I just wanted to thank everyone who participated and Nvni for joining us today. I know you have a pretty full one-on-one schedule. If anyone who tuned in at the presentation would like to catch up with management, you can reach out to them directly or to us at Cwdy. We'll make sure we'll set something up for you so you can learn more about Nvni. With that, I'll hand it over to you, Pierre, for some closing remarks.
Sure. Thank you, Angela. Great to be here with you. I hope that my story and the story of Nvni is clearer for some of you who did not hear, did not know of us, and really hope you support us as we keep executing over time. What I believe is a really interesting opportunity for Latin America, for investors wanting to get exposure to Latin America. Thank you very much.
Thank you. Thank you, everyone. Have a good rest of your day.