Earnings call transcript: Oi S.A. focuses on innovation in Q2 2025

Oi S.A. reported its second-quarter 2025 earnings, highlighting a strategic pivot towards digital and cloud services amid ongoing financial restructuring. The company’s revenue reached R$684 million, marking a 17.7% decline year-over-year. Despite these challenges, Oi’s stock rose modestly by 0.69%, reflecting cautious investor optimism about its transformation efforts. According to InvestingPro analysis, the company is currently trading near its Fair Value, with a market capitalization of just $35.2 million.

Key Takeaways

• Oi S.A. is shifting focus from traditional telecom to digital solutions.
• Revenue decreased by 17.7% year-over-year, highlighting ongoing challenges.
• The company is enhancing its product portfolio with new digital security and cloud services.
• Operational cost savings and asset shutdowns are part of the restructuring strategy.

Company Performance

Oi S.A. is undergoing a significant transformation, moving from legacy telecom operations to a more technology-oriented enterprise. This shift is evident in its focus on digital security, cloud contracts, and ICT services. Despite a year-over-year revenue decline, the company is making strides in cost management and innovation.

Financial Highlights

• Revenue: R$684 million, a 17.7% decrease year-over-year.
• Routine EBITDA: -R$98 million, showing improvement.
• Cash position: Reduced from R$1.45 billion to R$1.16 billion.
• Net debt: Approximately R$10 billion, a 51% increase year-over-year.

Outlook & Guidance

Oi S.A. is proposing amendments to its reorganization plan, aiming to generate R$2.6 billion in cash reinforcement. The company targets break-even in remaining operations by the end of 2025, focusing on Oi Solutions as a key cash generator.

Executive Commentary

Executives emphasized the strategic shift: "Q2 reveals a leaner Oi, more focused and better positioned to grow sustainably in a new cycle powered by innovation and efficiency." They highlighted the move away from a physically asset-heavy model towards a technology-oriented enterprise.

Risks and Challenges

• Revenue decline poses a challenge to financial stability.
• Increased net debt may affect future investment capacity.
• The ongoing restructuring requires effective execution to achieve desired outcomes.

Q&A

No specific Q&A session was recorded, but stakeholders were invited to send inquiries to invest@oi.net.br.

Full transcript - Oi SA Pref (OIBR4) Q2 2025:

Rodrigo Aguiar, Chief Financial Officer, Oi S.A.: Good morning, ladies and gentlemen, and thank you for joining Oi S.A.’s second quarter 2025 earnings call. This conference will be conducted in Portuguese with simultaneous translation into English. To listen to the simultaneous interpretation, please click the interpretation button, the globe icon at the bottom of the screen, and select your preferred language, Portuguese or English. This conference is being recorded, and the replay will be available at the company’s investor relations website later. During the company’s presentation, all participants will be in a listen-only mode. I’d like to turn the conference over to Mr. Rodrigo Aguiar, our Chief Financial Officer. You may begin, sir. Good morning, everyone, and welcome to our meeting to discuss the company’s results for the second quarter 2025. Joining me in this presentation are members of the company’s Executive Board, as well as our investor relations team.

In the first part of the presentation, we will address some of the points related to the recent proposed amendment to the company’s court-supervised reorganization plan, as well as other measures necessary for the plan to be carried out. We will move on to the slides detailing Oi S.A.’s performance in the quarter. We’d like to remind you that after the presentation, should there be any questions or comments, you may send them per email to our investor relations team at invest@oi.net.br. Slide four now, please. On slide four, we would like to highlight the rationale as well as some of the key measures included in our proposed amendment to the reorganization plan. This initiative is aimed at generating short-term liquidity for the company, with the goal of strengthening its long-term sustainability and value creation.

This initiative aims to preserve cash by extending maturities and renegotiating terms with the main creditors, focusing exclusively on obligations that would otherwise result in immediate cash outflows. The reason for the amendment is directly related to the non-fulfillment of key assumptions set forth in the plan that was approved in April 2024. That widened the funding gap already anticipated in the financial projections at the time. This is a strategy that intends to provide the company with time and financial flexibility to make headway on two priority fronts of the reorganization plan: the sale of the V.tal UPI as another asset, as well as the pursuit of break-even point in the remaining operations with a focus on Oi Solutions and Oi Services supported by decommissioning our legacy.

The proposed actions include renegotiations with specific creditors, such as class one creditors, panavendors, and taker-pay contracts, and the new payment terms that could generate a cash reinforcement of R$2.6 billion for Oi. The proposal also includes the participation of priority creditors who may be paid with the proceeds from real estate sales. In addition, the plan seeks to provide greater flexibility in the allocation of funds from these real estate sales and the use of alternatives for payments. Finally, we propose that the use of appeal bonds be an additional source to settle obligations with class one creditors. In short, the amendment seeks practical solutions to mitigate short-term pressure on the company’s cash position, balancing the need for liquidity with the preservation of value for stakeholders.

This set of actions reinforces our commitment to the responsible execution of the plan and to Oi’s financial sustainability, preparing the company for a new cycle of value creation. Slide five. We flesh out some of the terms of the proposed amendment to the reorganization plan, focusing on the restructuring of payments to labor creditors and vendors, as well as the inclusion of adhering priority creditor figure. For class one creditors, two payment options are being proposed. For the aggregate limit of R$30 million, option one provides for the full settlement of claims of up to R$9,000 within 180 days from court ratification. Option two offers a single payment within up to three years for claims of up to 150 minimum wages, with the possibility of using appeal deposits as collateral. Amounts exceeding this limit will follow the terms of the general modality of class three.

As for panavendors and taker-pay with or without collateral, payments will be made through 2038 using the proceeds from real estate sales. Finally, the adhering priority creditors may voluntarily include their claims to be settled under the terms of the amendment, with participation in the distribution of net proceeds from real estate sales. Slide six. Retaining a larger share of the net proceeds from real estate sales within the company will be an important liquidity lever. The new proposed distribution aims to retain up to R$600 million in net proceeds from real estate sales, fully allocated to investments in Oi S.A.’s operations, supporting its digital transformation. This compares with the current R$190 million, namely 100% of net proceeds up to R$100 million and 30% of net proceeds between R$100 million and R$400 million.

Above this limit, the next R$1 billion must be allocated to the payment of vendor partners, taker-pay with or without collateral, included in the amendment on a pro-rata basis. Above R$1.6 billion, the proceeds from real estate sales shall be distributed as originally set forth in the plan. Additionally, Oi S.A. will seek to raise funds through appeal bonds to be used for payments to labor creditors and for the company’s working capital in a 50/50 split. These measures are essential to reinforce the sustainability of the reorganization while ensuring liquidity, maintaining operations, and advancing the growth strategy of the remaining businesses. From this point forward, we will move on to the section covering the quarterly results. Slide eight. The second quarter of 2025 marks a symbolic moment. It is the first full quarter under the new operating model following recent asset sales.

The quarter was marked by significant progress at Oi Solutions, which accounted for 50% of the revenue, especially in shifting the revenue mix toward information and communication technology, ICT. We highlight the new cloud contract signed in the quarter, totaling R$62.3 million in revenue. We also innovated with the launch of a pioneering digital security product focused on network vulnerability detection, representing another step in consolidating Oi Solutions as a relevant technology player. The subsidiaries, which represented 39% of the quarter’s revenue, showed consistent growth, taking on an important role in the diversification of the company’s results. This was the first full quarter operating under the new model, following the completion of the ClientCo sale. As for the legacy segment, it now accounts for only 11% of the revenue and is scoring the progress of the transition to digital solutions.

We continue to move forward on two key fronts: migrating customers to digital solutions and decommissioning legacy networks. By June, 98% of the customer base of the three-digit service had been migrated, and around 60% of the interconnection stations were operating under the new topology. As a result, accumulated savings from asset shutdowns reached approximately R$1.4 billion by June 2025, with the expectation to reach R$2.5 billion by year-end.

Unnamed Executive, Executive Team Member, Oi S.A.: Moving on to slide nine, this quarter was defined by a continuous focus on core business operations, besides disciplined efforts to enhance operational efficiency and reduce costs. Oi S.A.’s consolidated revenue amounted to R$684 million, a 17.7% decline year over year. This drop, which had been anticipated, stems directly from the completion of the sale of our fiber and pay TV businesses, part of our strategic decision to concentrate resources on core segments. Oi Solutions, our corporate solutions arm, sustained a selective commercial strategy targeting high-value, high-margin contracts such as ICT services, cloud contracts, Internet of Things, and unified communications. These segments’ growing share of total revenues underscores our strategic shift towards technology, reinforcing a gradual consolidation of a more modern and market-aligned portfolio. Our subsidiaries delivered substantial year-over-year revenue growth, especially following the closure of the ClientCo sale last quarter.

This performance highlights the growing importance of these controlled entities in diversifying our revenue base. On the cost front, we remain absolutely focused on financial discipline and cost control. OPEX, excluding rent and insurance, combined with CAPEX, fell by 54% year over year. I’d like to underscore the significant savings we achieved in rent, insurance, and also third-party services, outcomes that reflect the ClientCo divestiture, the decommissioning of legacy networks, and the company’s strict cost management and strategic prioritization. Even in this challenging environment, our operational and strategic adjustments are yielding results, boosting efficiency, reinforcing core business progress, and positioning us structurally for a sustainable new cycle. Advancing to the next slide, starting this quarter, our net revenue excludes discontinued operations as the fiber and pay TV sale closed in February this year. This provides a more accurate reflection in the current scenario of our new structure and strategic focus.

This quarter’s net consolidated revenue was R$684 million, with a significant greater weigh-in from our core operations. Subsidiaries accounted for 39% of revenue, growing roughly 67% year over year. Oi Solutions now represent 50% of revenue, making it our primary revenue driver, with legacy operations now comprising only 11% of consolidated revenue. Oi Solutions contributed R$342 million in revenue, of which 34% came from ICT services, underscoring our emphasis on client digital transformation. Given this continued decline of legacy telecom services and other traditional revenue streams, revenues from cloud, unified and collaborative communications, and IoT have grown consistently, quarter over quarter, reflecting the company’s choice to prioritize higher value-added solutions that are more aligned with the needs of our customers. In summary, Q2 reveals a leaner Oi, more focused and better positioned to grow sustainably in a new cycle powered by innovation and efficiency. We are now consolidating our strategy.

Turning now to the following slide, this quarter we captured significant efficiency gains, which were directly reflected in our routine OPEX, driven by the conclusion of asset sales, progress in shutting down legacy operations, as well as the continued resizing and trimming of non-essential expenses. In the second quarter of 2025, OPEX, excluding rent and insurance, was R$570 million, a pronounced year-over-year decline, underscoring our restructuring consistency. Such performance was fueled by relevant drops in key expense categories, including third-party services, network maintenance, content acquisition, personnel, and G&A. Commercially, we adopted a more measured, rational approach focused on quality and profitability. It is important to acknowledge that Oi’s transition is both cultural and strategic. We are moving away from a physically asset-heavy legacy model and advancing toward a technology-oriented enterprise centered on digital, cloud, and intelligent connectivity.

Oi is consolidating into a leaner, more focused operation with a cost structure that is more aligned to our current reality and future challenges. On slide 12, we present the routine EBITDA and CAPEX for this quarter. Although still negative at R$98 million, routine EBITDA shows an improving trend compared to the prior quarter. This is a direct outcome of ongoing restructuring. The legacy went down and shift to digital solutions with the associated OPEX benefits, which we already highlighted. Looking ahead, we anticipate a positive momentum as we complete the migration of our customer base to digital platforms expected by the end of 2025. It is also important to highlight the resizing of the company’s CAPEX, which totaled R$41 million in the second quarter of 2025, representing a 70% decrease compared to the same period last year.

This reduction also reflects the completion of asset sales in the previous quarter. Currently, 100% of CAPEX is directed toward ongoing operations with a focus on digitalization, efficiency, and higher return services. Around a 45% increase in CAPEX allocated to continuing operations this quarter shows that even amid restraint, the company continues to invest selectively and strategically in assets that bolster our new positionings. Now, moving on to slide 13, I would like to address the company’s cash flow and net debt. Cash management has been a major challenge during this period of transformation. As I mentioned previously, the failure to materialize key assumptions set forth in the approved plan has increased the funding gap. In this regard, the company has been working to address this gap through the sale of non-core assets, as well as negotiations of out-of-board creditors.

These measures, together with the initiative to amend the plan, aim to preserve cash, ensuring time and financial breathing room for the company to move forward on fronts such as the sale of V.tal UPI and other assets, as well as the pursuit of break-even for the remaining operations. We started the quarter with a cash position of around R$1.45 billion and ended it with R$1.16 billion, a result of still negative operating cash generation. As expected, proceeds from non-core asset sales this quarter were lower than in the previous quarter, totaling R$95 million, with highlights including fiscal fees, tax credits related to interest forgiveness, BTSA, and real estate sales. It’s worth noting that early in the third quarter, we received an additional R$97 million in cash from the assignment of credits tied to the expropriation process of the Afonso Pena property.

With respect to the net debt, we observed stability during this quarter, totaling circa R$10 billion. On a year-over-year basis, the 51% increase reflects the disbursement of new financing in August 2024 as approved under our reorganization plan. We are in constant dialogue with creditors and suppliers, seeking solutions to address the funding gap that remains throughout 2025. The company’s financial management continues to be conducted with strict rigor and responsibility. Finally, moving on to slide 14, in 2024, we approved our reorganization plan, achieved an unprecedented regulatory decision, such as the signing of the authorization term, resumed arbitration proceedings with Anatel and advanced in the completion of the equitization process through the conversion of part of the court-supervised credits into shares. This was followed by the implementation of a new governance structure, making the beginning of a management team specialized in corporate restructuring.

Now, despite these important developments, a targeted course correction will be necessary to ensure the company’s financial sustainability. That includes reopening negotiations with some of our creditors. We want to pursue a broader restructuring that maximizes value for all creditors and preserves the operational continuity of the group, including other operating subsidiaries such as Cerede and Tarto. At the same time, we must consolidate the company’s activities. In addition to increasing the revenue contribution from subsidiaries, we must maintain the focus on strengthening Oi Solutions, a business with long-term contracts, low CAPEX intensity, capable of delivering predictable cash generation, which already showed positive margins in 2025. It is also essential to advance in cost rationalization, adjusting the structure to the company’s new size, continuing with the asset sales provided for in the plan.

With these actions, it is expected that this company becomes increasingly more sustainable in the long term while continuing to fulfill its important social role. Our operations are present in 27 states of Brazil, where we are responsible for a significant portion of the country’s voice interconnection services, serving a large share of the public sector and major companies. This concludes our earnings presentations for the quarter. Please feel free to send any questions or comments to our investor relations team at invest@oi.net.br. We’ll be happy to answer all your questions. Thank you very much. Thank you. The second quarter 2025 earnings call presentation for Oi concludes now. Please check our website. We wish you a very nice day.

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