Oi SA (OIBZQ) Q1 2025 Earnings Call Highlights: Strategic Shifts Amid Revenue Challenges

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Fri, May 16, 2025, 1:09 AM 4 min read

New Revenue Contracts: BRL53 million in new revenue from cloud computing segment contracts in early 2025.
Revenue from Domestic Subsidiaries: Nearly 20% year-on-year growth.
Cost Savings: BRL1 billion accumulated savings from January 2024 to March 2025, with an expected total of BRL2.5 billion by the end of 2025.
New Oi Revenue: BRL631 million in Q1 2025, down 27% year-on-year.
Oi Solucoes Revenue: BRL371 million, representing approximately 60% of total revenue.
Operating Expenses Reduction: 19% reduction in operating expenses and investments in Q1 2025.
Consolidated Net Revenue: Fell 34.3% compared to Q1 2024.
Routine OpEx: BRL1.9 billion, a 21% year-on-year reduction.
Cloud Services Revenue: 8% year-on-year increase.
Unified and Collaborative Communications Revenue: 30% year-on-year growth.
IoT Revenue: 12% year-on-year growth.
CapEx: BRL78 million in Q1 2025, a 44% year-on-year reduction.
Cash Balance: BRL1.5 billion at the end of the period, with an 18% cash burn in the quarter.

Warning! GuruFocus has detected 8 Warning Signs with OIBZQ.

Release Date: May 15, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Oi Solucoes is the main source of revenue growth, with a strong presence in both private and public sectors.
The company won bids and signed contracts totaling BRL53 million in new revenue in early 2025.
Revenues from domestic subsidiaries grew by nearly 20% year-on-year.
Cost-saving initiatives resulted in a BRL1 billion reduction in expenses from January 2024 to March 2025.
Oi Services, a newly created subsidiary, began contributing to consolidated revenue results in March 2025.

Negative Points

Consolidated net revenue fell 34.3% compared to the first quarter of 2024.
Revenue from Oi Solucoes fell by 21% year-on-year due to reduced demand for legacy services.
Routine EBITDA continues to be impacted by high costs of legacy services.
Cash burn was 18% in the quarter, with a substantial portion of cash tied to specific obligations.
The company faces challenges in addressing the funding gap and needs to progress on asset sales.

Q & A Highlights

Q: Can you elaborate on the performance and strategic importance of Oi Solucoes in the first quarter of 2025? A: Marcelo Milliet, CEO, explained that Oi Solucoes is the core component of the group and the main source of revenue growth. It has a significant presence in both the private and public sectors, offering a robust portfolio of technology solutions. In the first quarter of 2025, Oi Solucoes strengthened its presence in the cloud computing segment, winning contracts totaling BRL53 million in new revenue. The company continues to focus on higher value-added segments, with 39% of its revenue coming from information, communication, and technology services.

Q: What are the key initiatives Oi is implementing to manage costs and improve operational efficiency? A: Marcelo Milliet highlighted that Oi is focused on optimizing services and gaining efficiency, particularly in the legacy network. The company has achieved a cost saving of about BRL1 billion from January 2024 to March 2025 and expects to complete the demobilization of the legacy network by the end of 2025. Additionally, Oi is implementing strict cost control measures, reducing operating expenses by 19% this quarter, and achieving a 17% reduction in the total number of employees.

Q: How has the recent asset sales impacted Oi's financial performance and future strategy? A: Marcelo Milliet noted that the revenues and expenses of UPI, ClientCo, and TV Co have ceased to be part of New Oi's results since March, impacting quarterly and annual comparative analysis. The exit of fiber and TV operations contributed to a 34.3% decline in consolidated net revenue compared to the first quarter of 2024. However, the company is focusing on strengthening Oi Solucoes and increasing revenues from national subsidiaries to offset the decline in legacy services.

Q: What are the future growth opportunities for Oi, particularly in the ICT sector? A: Marcelo Milliet emphasized that Oi Solucoes is focusing on high-growth potential verticals in information and communication technologies (ICT). Cloud services revenue increased by 8% year-on-year, while unified and collaborative communications grew by 30%, and IoT revenues by 12%. ICT revenues accounted for approximately 39% of Oi Solucoes' total revenue in the first quarter of 2025, highlighting the company's strategic focus on these areas.

Q: What measures is Oi taking to address its cash burn and funding challenges? A: Marcelo Milliet stated that Oi ended the period with a cash balance of BRL1.5 billion, with a cash burn of 18% in the quarter. The company is working on funding alternatives to offset the cash burn and received advance credits related to PIS/COFINS taxes and the DNIT process with Telemar. Oi is also focused on selling other assets as part of its court-supervised reorganization plan to address the funding gap in 2025.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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