VTEX Q2 2023 Earnings Call Transcript

Quartr
Provided by Quartr
August 8, 2023

There are 9 speakers on the call.

Operator

Hello, everyone, and welcome to the Vitex Earnings Conference Call for the Quarter Ended June 13, 2023. I am Giulio Barro Fernandez, Investor Relations Director for BTEX. Our senior executives presenting today are Gerardo Tomas, Jr, Founder and of CEO and Ricardo Camata Sodore, Chief Financial Officer. Additionally, Mariano Ramirez de Faria, Founder and Co CEO And Andres Polydoro, Chief Strategy Officer, will be available during today's Q and A session. I would like to remind you that management may make forward looking statements related to such matters as continued growth prospects for the company, industry trends and product and technology initiatives.

Operator

These statements are based on currently available information and our currently assumptions, expectations and projections about future events. While we believe that our assumptions, expectations and projections are reasonable in view of to cover available information, you are cautioned not to place undue reliance on these forward looking statements. Certain risks and uncertainties are described under Risk Factors and Forward Looking Statements Sections of BTEX Form 20 F for the year ended December 31, 2022, and other BTEX filings within the U. S. Securities and Exchange commissions, which are available on our Investor Relations website.

Operator

Finally, I would like to remind you that during the course of this conference call, we may discuss some non GAAP measures. A reconciliation of those measures to the nearest comparable GAAP measures can be found in our Q2 2023 earnings press release available on our Investor Relations website. Now let me turn the call over to Gerardo. Gerardo, the floor

Speaker 1

is yours.

Speaker 2

Thank you, Julia. Welcome, Welcome, everyone, and thanks for joining our Q2 2023 earnings conference call. In the past few months, we have witnessed Significant milestones are exciting events that have proppered us forward. From the successful celebration of Etech's Day, Our commercial events that gather over 20,000 attendees per day, and we announced the launch of 5 new products with excellent customer reception to our 1st time ever Investor Day on the 2nd anniversary of our IPO. For those who didn't have the chance to connect to our Investor Day, I highly recommend you take a look at the audio recording available on our Investor Relations website.

Speaker 2

As we embark on this earnings call, I'm thrilled to provide an update on our performance During the Q2, I'm pleased to announce that our company has demonstrated remarkable resilience and achieved a strong performance in the Q2. Our GMV experienced a significant 23.4% year over year growth. This growth is a testament of ZEETEC's strong value proposition that continues to attract new customers to our platform. Moreover, despite the challenging macroeconomic scenario, our existing customers continue to outperform the market with same store sales remaining at the teens range, although slightly below historical levels. Additionally, not only have we exceeded our revenue projections, reaching almost $48,000,000 this quarter, but we have also successfully maintained leverage across all our cost and expenses.

Speaker 2

Despite the demanding environment, our teams unwavering dedication and strategy decision making have allowed us to drive and deliver exceptional results. Thanks to it, every quarter, We feel closer to our goal of becoming the backbone of Connected Commerce. The platform that powers unified commerce Experiences for businesses around the globe. Now let's delve into specifics. In Q2, we added several new customers that migrated from other platforms, including Springer Carrier and Kvale in Brazil, Viera Bike and Pro Beauty in Romania Supermacadros Internacionale HEB in Mexico New Zealand's wine talent in New Zealand and Kaiser Roth in the U.

Speaker 2

S. In addition to attracting new customers, we also focus on strengthening our relationship with existing customers by supporting their expansion efforts. During the Q2, several premier brands and retailers chose to expand their operation with us by opening new online stores and further integrating with us. This includes Bell Corp, who added a store in Panama, currently operating in Latin America, in Countries such as Mexico, Colombia and Chile, among others. Tommy Hilfiger, who added a store in Costa Rica, currently operating in Latin America, in countries such as Brazil, Mexico, Colombia, among others.

Speaker 2

And Wurpo, We added a store in Mexico, Spain and Sweden, now operating in Latin America, EMEA and APAC, in countries such as Brazil, Italy, India and Singapore and more. The decision of these brands to expand their operations with us serves as a testament to the strength of the platform and its competitive proposition, which has forced trust and loyalty among our customers. We take immense pride in being the partner of choice for their We are thrilled to offer unwavering support, leveraging the assets of the physical Towards and maximize their potential, offsetting the right features and products is at the forefront of our strategy, empowering our customers to accelerate their growth and enhance operational efficiency. Our commitment lies in helping them surpassed the overall market expectations, and we are dedicated on accompanying them on their profitable growth Journey every step of the way. We're proud to share that P TECH was awarded medals in all 24 categories of the 2023 paradigm B2B combined, enterprise and mid market issues.

Speaker 2

We received gold medals in customer Service and support, integrations, operations and infrastructure, marketplace and promotions management. A standing point is that we were the sole vendor to achieve a gold medal for the marketplace product capability in both reports, certifying our position as the top choice for enterprise B2B companies. On top of all the Investor Day customer cases, Let me share some incremental success stories that demonstrate the capability of our platform and the remarkable outcome they have achieved. MyGeisha, the renowned beauty brand with a presence in 13 countries and over 58 stores, partnering with Gtest in Romania to propel its online sales growth. By leveraging our marketplace solution, MyGeisha diversified its sales channels and expanded its reach by offering complementary building products.

Speaker 2

Furthermore, we worked closely with them to customize the front end of its website, resulting in a staggering sevenfold Increase in online sales. This collaboration accelerated its e commerce success and solidified its Brand Position in the competitive beauty industry. Midea, a preeminent Chinese electrical appliance manufacturer with a vast Global footprint comprising 200 subsidiaries and over 60 overseas branches turned to Vitex for scalable solutions and improved business performance in Brazil. Midea successfully implemented critical features such as the catalog management, Pricing optimization and promotional tools for out of the box solutions. The results were impressive With Midea achieving a remarkable 10% increase in overall conversion rate, a 40% boost in organic revenue, an 8% rise in mobile conversion rate and a significant 13% reduction in bounce rates after their migration to Vitex.

Speaker 2

These partnerships have amplified how Detect empowered business to unlock its potential and thrive in target markets. Copenhagen, a leading premium chocolate brand under the CRF Group in Brazil, harnessed the power of the taxonomy channel architecture To enhance its sales during the Easter season, leveraging our platform, the CRM Group achieved a remarkable 20% increase in sales by seamless integrating its physical stores and franchisee into its e commerce operations. This integration allowed for expedite delivery options and boosted customer satisfaction. Additionally, Copenhagen experienced a 50% surge in in store pickups, We have 55% growth in sales from loyal customers and an influx of 2,000,000 customers contacted via WhatsApp. TTEC's comprehensive solutions proved instrumental in driving Copenhagen Growth and delivering on exceptional customer experience.

Speaker 2

A global sportswear Giant and a key player in the local market selected BTEC in Latin America to enhance Utilizing Vitek's customizable checkout process, The integrated anti fraud protocols to personally access order across both the web and user interface channels, Pre and post order creation. This proactive approach empowered our customers to manage potential attacks more effectively, enhancing security and customer satisfaction. Through this collaboration, Vitex enabled them to protect It's limited edition SKUs and provide the consumer an exceptional online shopping experience. William Balfour Motors, a BMW dealer in Chile, partnered with Vitex to successfully transition with automotive Commerce to cater to customers' needs through these 2 channels. By implementing platform for BMW Mi And BMW Motorrad, they provided a tailored online shopping experience.

Speaker 2

Overcoming automation challenges, BMW utilized VTech's user friendly and comprehensive tools, allowing various business areas to participate. Looking ahead, BMW plans to enhance its platform and offer customers an even more convenient experience, bringing the option of vertical reservation closer to them. This transformation in the automotive industry enabled customers To purchase cars from the comfort of their homes, thanks to advancements in digitalization and seamless communication with sales representatives. Iguatemi 365, a luxury marketplace representing over 200 national and international brands from Brazil, we wanted a new network of luxury malls leverage Vitex Pestor to optimize its website performance. By implementing our solution, Iguaceliad 365 achieved an impressive results in core performance metrics, including making the page much more stable with a remarkable 92% reduction in shifting content, ensuring smoother interactions with 81% decrease and input delays and making the overall loading experience faster with a 27 Percent improvement in display in the main content.

Speaker 2

This substantial improvement enhanced User experienced and solidified Iguacherny 365 positions as a premier destination for luxury shopping in Brazil. META Tools, a leading company in the digital shelf industry, partnering with the testing Germany, Italy and Romania to launch a keybricleshop.grow marketplace With an estimated 50 major merchants and brands with a minimum of 100,000 SKU listed expected in the first Here, META tools aims to promote Romanian companies and drive business growth. The marketplace We'll offer a wide range of products, including power tools, gardening equipment, cleaning supplies and more. By partnering with DTAC, Metatools has built a user friendly platform that allows for easy expansion and international scalability. The ebrickshop.roll marketplace aims to cater the do yourself enthusiastic and professionals, connecting them with quality products and fostering a sense of community.

Speaker 2

In addition to the remarkable customer success cases, I'm delighted to share with you that during our Investor Day, we had the privilege of hosting a panel with Richard Fauw, Principal of Transformation and Portifollo operations at Kalaya Group, the controlling shareholder of Beautycounter, Our recently announced new customer in the U. S. We also had the pleasure to announce Casimo in France and Hearst in the U. S. As our new customers during our Investor Day.

Speaker 2

This esteemed brand Had chosen Vitex for their trust digital commerce platform, they are expected to go live progressively in the coming quarters. The decision to partner with Vitex holds significant importance, and it is worth delving into the reasons behind their journey. By selecting Vitex, these forward thinking companies recognize our platform's unparalleled value and robust capabilities, including its scalability, flexibility and ability to seamless support their expansion into new markets. We're excited to accompany Beautycounter, Casinos and Hearst on their journey, and we're confident that our partnership will yield Our global expansion journey has been progressing, and the additions to our Growing list of steam customers are a solid step in our journey. We take great pride in our effort to provide cutting edge solutions that empower businesses to embrace digital transformation, which industry leaders have also recognized.

Speaker 2

We believe that as we continue to award new customers such as Buickal, Ter Castenor and Hearst, we will pave the way across the globe to achieve our mission to become the backbone of our connected commerce. I would like to express my gratitude to our 1305 Vitex employees who are dedicated to making Anticloud's I will now hand the call over to Ricardo to discuss our financial performance for the quarter.

Speaker 3

Thank you, Geraldo. Hi, everyone. I'm pleased to share VTech's Q2 2023 financial results with you. I'm excited to share that Once again, our company's top line performance was robust. As highlighted by Gerardo, our Q2 GMV growth achieved 23.4% in U.

Speaker 3

S. Dollars and 21.2% on an FX neutral basis. Our Q2 revenue exceeded expectations, surpassing the upper end of our guidance, reaching $47,900,000 and reflecting a year over year increase of 23.7 percent in U. S. Dollars and 22.9% on an FX neutral basis.

Speaker 3

This outcome demonstrates our ability to attract new customers to VTech's platform and The resiliency of our blue chip customer base. We are reassured to observe that we are continuing to assist our customers in outperforming the market. Double clicking on our top line, our subscription revenue reached $44,800,000 in the Q2 of 2023 from $36,600,000 in the same quarter last year, a year over year increase of 22.2% in U. S. Dollars and 21.4 percent on an FX neutral basis.

Speaker 3

Our services revenue reached $3,100,000 in the Q2 of 2023 from $2,100,000 in the same quarter last year, a significant Year over year increase given the new projects that we are under implementation. Our subscription gross margin also improved versus $6,000,000 in the Q2 of 2022. Non GAAP subscription gross margin was 75.3% in the Q2 of 2023, compared to 73.9 percent last quarter and 72.5% in the same quarter of 2022. The 280 bps year over year margin expansion shows the commitment of our team to keep improving our margins. This margin improvement was driven mainly by migrating non core services to more efficient hosting providers and the optimization and operational leverage of our support costs.

Speaker 3

We are proud of what we have achieved on this front and excited about what's to come. We delivered a year over year improvement of more than 120 bps on our overall gross margin in Q2. We continue working on a few implementations in the U. S. And Europe, such as the ones mentioned priorly, Beautycounter, Casino and Hearst, where we are proactively investing in our services offering to ensure successful go lives.

Speaker 3

By design, This impacted our services gross margin and therefore our overall gross margin. Even though this quarter we delivered an improvement in service gross margin versus last quarter, we anticipate this commercial decision to still have some impact on our gross margin in the short term as it will position us better in newer regions in the medium to long term, enabling us to implement new customers smoothly and successfully. Our non GAAP total operating expenses reached $34,100,000 in the Q2 of 2023 from $31,900,000 in the prior quarter $43,300,000 in the same period last year. The year over year improvement reflects the organizational restructuring we made over the past year. The quarter over quarter increase in expenses is mainly attributed to the foreign exchange appreciation of the Brazilian Real as most of our payroll in R and D and G and A is based in Brazil.

Speaker 3

Order drivers that also impact our expenses To a smaller extent were the annual salary increase in the R and D team and a minor impact from VITAX Day event, whose efficiency improved significantly compared to previous year. Thanks to our diligent expense management and strong revenue growth, Our non GAAP operating income showed significant improvement. In the Q2 of 2023, We achieved a negative 3.2 percent margin, a remarkable improvement from the negative 45.1% margin recorded in the same quarter last year. This represents an impressive year over year improvement of 42 percentage points. Furthermore, on a quarter over quarter basis, We saw a 6.5 percentage points improvement in our non GAAP operating income margin.

Speaker 3

These positive trends highlight Our commitment to enhancing profitability and strengthening financial performance, while still delivering high revenue growth. As of the 3 months ended June 30, 2023, VITEX had a negative $3,300,000 free cash flow compared to a negative $5,000,000 in the prior quarter and a negative $12,700,000 free cash flow in the same quarter of the prior year, also demonstrating operational efficiency from a cash flow perspective. Before I move The outlook for Q3 and fiscal year 2023, I would like to update you on the share repurchase program approved in August last year. As of June 30, 2023, the remaining balance under this authorization was nearly $3,500,000 We purchased 6,700,000 shares at an average price of $3.93 per share. Today, we are pleased to inform our investors that Vitek's Board of Directors has approved another 1 year share repurchase program for Vitek's Class A common shares up to $20,000,000 This decision on the timing and quantity of share repurchase, if any, will be at the discretion of our management, taking into consideration market conditions and other relevant factors.

Speaker 3

This move reflects our confidence in the company's financial position and our commitment to delivering long term value to our shareholders. Looking ahead, we are excited by Vitek's adaptability and ability to drive. Despite the uncertain macro, Vitex has consistently outperformed the market, while also delivering robust long term performance metrics. We are currently targeting revenue in the $48,200,000 to $49,000,000 range for the Q3 of 2023, implying a year over year growth of 19% on FX neutral basis in the middle of the range. For the full year 2023, considering the current performance of the company, we are increasing the bottom and the top of the range, now targeting the full year to end between 18% to 20% on an FX neutral year over year basis, implying a range of $191,000,000 to $195,000,000 based on Q2 average FX rates.

Speaker 3

As we continue executing our strategy for profitable growth, we anticipate relevant year over year improvements in non GAAP operating income margin in the second half of twenty twenty three. We are confident in VTech's unique value proposition, centered around enabling our customers to achieve profitability and sustainable growth by reducing total cost of ownership and simplify the e commerce architecture. We will continue to execute the integration of e commerce with physical stores, delivering omnichannel excellence that enables us to deliver rapid growth and profitability that our customers seek. We remain focused on adapting to market conditions, providing innovative solutions and capitalizing on emerging opportunities To drive sustainable success for our valuable customers, partners, employees and investors. We are excited about the opportunities ahead.

Speaker 3

With that, let's open it up for questions now. Thank you.

Speaker 4

Thank you. Thank you. And our first question comes from the line of Marcelo Santos from JPMorgan. Please go ahead.

Speaker 5

Good evening. Thanks for the opportunity for asking questions. I have two questions. The first is the bit on revenues versus management expectations Came from more or less what stores. Could you please discuss a bit?

Speaker 5

I mean, was this like more stores or more volume or The sales cycle was shorter. Just wanted more color on why what came better than you expected? And the second question is Regarding the further decline in headcount, could you please just discuss like what changes are you making now? Where are these changes located? Thank you very much.

Speaker 3

Thanks for your question, Marcelo. It's great to have the opportunity to go deeper And show the reasons behind Vitak's outstanding performance in the market and to address the sustainability of this achievement. So, 1st and foremost, our over performance can be attributed to the new customers coming and joining the VITEX platform, both on new ACV signed and on backlog projects going live. This demonstrates the attractiveness of our value proposition to our customers of achieving profitability and sustainable growth by reducing the total cost of ownership and simplifying their commerce architecture under the current market demands. Additionally, as mentioned in our earnings press release, we have seen an encouraging stabilization of our sales cycle in the current quarter, which also had a positive impact on our results through the go live of projects under implementation.

Speaker 3

Another factor that contributed to our resilient performance was our existing customer base. Although the same store sales was slightly below expectations. Our existing enterprise customer base GMV still grew in the Teams levels in Q2, significantly above the market and was a remarkable driving force behind our Q2 growth. While we acknowledge that we are still navigating an uncertain macro scenario that may impact the same store sale of existing customers and the sales cycle of new customers, our positioning remains strong. Our commitment to providing a composable and complete platform with a low TCO And our relentless focus on delivering value to our customers continue to set us apart.

Speaker 3

We have a pipeline of promising cases undergoing implementation, And we are seeing encouraging stabilization of the sales cycle, further bolstering our confidence in maintaining our growth trajectory. Looking ahead, we remain grounded in our guidance and confident in our growth prospects. Our strategy is aligned with our execution, and we are confident in achieving our Outline targets. And for the second question, I'll pass it over to Mariano to talk about the headcount.

Speaker 6

So about the headcounts, our headcount has remained pretty stable when compared to the previous quarter. We are confident that our current staffing levels align well with the demand we are experiencing and we don't foresee any substantial changes Our headcount will likely hover around these levels, possibly with a slightly uptick, But we maintain a rigorous hiring standards, which can occasionally result in a longer turnaround time for replacements to a natural So in some cases, we might choose to refrain from refilling a position in sense. Simultaneously, new roles will be introduced based on our operational requirements. This dynamic might lead to minor fluctuations In headcount from quarter to quarter, but we are not anticipating any significant shifts. Considering that personnel, In the Q1 of 2023, we have around 1300, 2nd quarter around 1300, And we foresee that level.

Speaker 6

So we are not anticipating any changes on that. And considering the personnel costs make up a substantial portion of our Expenses, the stabilization in headcount in conjunction with our projected revenue growth, it is a driving force behind our Expectations of continuing year over year operating income margin improvement for the second half of this year.

Speaker 5

Perfect. Thank you very much for the comprehensive answers.

Speaker 4

Thank you. Our next question comes From Lucas Chavez from UBS. Please go ahead.

Speaker 1

Hi, thanks for having my question. 2 from my side here. The first one is you mentioned during your Investor Day and The also new products and solutions for customer engagement. So can you please comment on the reception by the clients of the new product launches and how do you see It's going forward. The second one, it's on competition.

Speaker 1

And are you seeing competitors more aggressive on pricing or take rate

Speaker 6

Pleased to get this, Mariano. 1st on the competition, we don't see a brutal change on the market dynamics. We are seeing the market operating in the same kind of price. We also but although we see A change from a client perspective. The client is much more aware of the total cost of ownership Of the platforms in the market.

Speaker 6

So although we don't see a competitor's kind of changing Price strategy, but we are seeing a pricing momentum kind of big topics On the RFPs on the process that have been hired. So on the sense, as we are positioning as a low TCO A sustainable platform, we it's our bet that we can capture the movement of the market on this. On the second question around the product and solutions for the engagement, we see the channels, the organic channels as one of a high profitable operations for our customers. So To sell more with their organic assets, it is one of our strategy to make our clients grow. So I can call, for example, to extend the endless aisle in Physical stores and joining operations with the platform.

Speaker 6

So yes, Vitex launched in Vitex Day. The Vitex Pick N Pack That combines with Vitex Commerce gives the ability of any client of Vitex to have a seamless pick and pack solution that can put all their physical Stores into the digital journey. Another one is the live shopping. It's a new organic channel that it's a trending channel On the marketing and pretty big in Asia, not in the United States, not in Europe, but pretty big in Asia that Also, we announced it in VTech's Day, live shopping with a personal shopper, so concierge commerce. So, we believe The missing link in between online and offline also is the sales team, the team that are inside the stores.

Speaker 6

And for that, we launched the sales app, the in store solution of Vitex that allows the sales team to participate in the journey. And we believe with install sales app plus CommerceSuite, we fulfill the necessity of a unified commerce, Enhancing our position as a number one solution for Unifi Commerce by Gartner. So let me know if I cover the two aspects of the question, please.

Speaker 1

Yes, yes. That was very clear. Thank you.

Speaker 4

Our next question comes from Clark Jefferies from Piper Sandler. Please go ahead.

Speaker 7

Hello. Thank you for taking the question. First question is really around some of those North American merchants that you Indicated you're going through implementation or recent deals. How should we size those merchants? I mean, what's the line of sight to being able to Claim 100,000,000 plus GMV Merchants in North America at this point.

Speaker 7

And then second question is really around Really around the another share repurchase authorization today. Is this an opportunistic use of capital given the sort of Focus on leverage in the model right now or do you think even looking beyond this year buybacks will continue to be attractive? Thank you.

Speaker 6

So Mariano here. I'm going to answer about the cases that we announced in Investor Day. We are proud Of the solid steps we are making on our international expansion. We are seeing that our positioning as a commerce specialist With a very technical approach and our positioning as a composable and complete solution is helping our message to resonate more and more with potential customers in U. S.

Speaker 6

And Europe. At our recent Investor Day, we shared Those contracts with renowned brands like Beautycounter, Casino and Hearst, These companies have chosen Vitex as their preferred digital commerce platform and will progressively go live in the forthcoming quarters. We also have additional customers who have already signed contracts that are under implementation and look forward to announce Once they are live, we are having a good consistent pipeline in the U. S. And Europe.

Speaker 6

So we have a lot of work ahead of us. And in the quarters to come, as always, We are announcing you're going to see our clients live being announced as well. It's also interesting to remark the search of a B2B opportunities that are emerging. As I mentioned in previous earnings calls, nearly half of the opportunities in the United States are B2B leads. Our value proposition is resonating with potential customers.

Speaker 6

We are consistently advancing to more mature stages on RFP processes And showing casing the growing consideration of our composable and complete platform, Peach. Let's go quickly on Three cases like the Beautycounter that you mentioned, we will handle all online operations and transactions for them, The beauty consultants given their MLM go to market strategy, we're going to hold the digital direct Consumer channel and their physical stores also in the United States. And this rollout will be also progressive and will start to impact our operational metrics next The year as well. So even though we will run almost the entire volume of Virecao, just to align We will not run their wholesale channel. So just to make a disclaimer here.

Speaker 6

On Casino, Casino will start the go live phase in inviting friends and family to experience like the new web store. This limited introduction will take place in the single store within the next couple of months. Subsequently, we have mapped out Our rollout strategy that we won't fold progressively. We expect for the second half of twenty twenty four fully rolling out Casino in France. As you know, achieving a seamless transition in optical optimal operational volumes required like a really disciplined execution.

Speaker 6

We typically translate into a 6 to a 1 year ramp up time after the go live. So On Hearst Corporation, the U. S. Announcement that we brought in the Investor Day, they are gearing up and adding more than Brands into VTech's platform. Each of these brands will work as separate marketplace, Caracta is by its own unique attributes and offerings.

Speaker 6

While the brands will share a common pool of sellers and a unified catalog, The autonomy will be clear through the product descriptions and presentations. To sum it up, We see a significant opportunity for DTX in the U. S. And Europe. We are seeing more interest in our offering.

Speaker 6

The analysts of Gartner, IDC and Forrester are increasing the levels of recognition of BeataX brand. We are tangibly reflecting into the customers that are pursuing organically VTechs. So we are Conservatively and cautiously optimistic for the future that will come from U. S. And Europe.

Speaker 3

Perfect, Mariano. And on the second question. Hi, Clark. Thanks for your question. Regarding the buyback, It's more optimistic opportunity here that we are seeing that we are approaching.

Speaker 3

So approving a buyback program for another year reflects our confidence in the company's financial position and our commitment to delivering long term value to our shareholders. And as a high growth company, we constantly look for opportunities to invest our resources to accelerate growth. Now considering our strong cash position and the clarity we have in terms of the next year's capital allocation, We view this buyback program as an attractive capital allocation opportunity for the next 1 year. Finally, it is important to note that the current buyback program that we are announcing is relatively aligned with the current The dilution from our share based compensation that we are seeing. So hopefully that answers the question.

Speaker 3

Yes.

Speaker 7

Thank you very much.

Speaker 4

Our next question comes from the line of Luca Brendon from Bank of America. Please go ahead.

Speaker 1

Hi, thank you for taking my questions. I have 2 here. First, if you could give us an outlook of how you're looking at the e commerce Market for the main regions you operate in. Has there been any improvement in the second quarter so far versus what we've seen in the Q1? Or it doesn't remain difficult.

Speaker 1

And second, a follow-up in competition. We have seen many of the Players that are focused on smaller clients saying that they are now focusing on entering the market Of bigger clients, have you seen any impact on that from your side? Have you seen any of your smaller clients maybe being targeted From those players, have there been any major impacts? Thank you.

Speaker 3

Luca, Ricardo here. Happy to take the first question on the market growth. I'll comment a little bit on the overall e commerce market growth, and then We can talk about the regions. So while e commerce continues to grow single digits, we continue To consistently outperform the market and perform on a GMV basis as strong as the top performers in the industry. Our ability to adapt and stay resilient has been crucial.

Speaker 3

Our dedication to customers and partners remain very strong, And we are continuously refining our offering to stay ahead of the game. There are a few reasons that drove our over performance versus the market in Q2. The first and most relevant one, as I mentioned to Marcelo's questions, was that we added new customers to VITEX, Adding net new GMV to our platform, we believe we are being successful in attracting new customers because we are helping them achieve Profitability and sustainable growth by reducing the total cost of ownership and simplifying their commerce architecture. The second one is that our Large enterprise existing customer base continued to show resilient growth in the same store sales in the Teams range. And it's important to mention that our existing customers are performing the market by seamlessly integrating their Fiscal stores into the digital shopping experience, as we mentioned in the previous quarters.

Speaker 3

And this integration of the fiscal store with the digital shopping experience Has led to an increase in conversion rates, expanded inventories, fewer stockouts and faster deliveries, among many other benefits. On the geographical breakdown, we give this disclosure on an annual basis, Given the sales cycles that we have, they are pretty long, right? So nothing too meaningful happens from quarter to quarter. And if you remember the 2022 disclosure that we made, in 2022, we grew like mid-20s percentage. Brazil was aligned with that, slightly below the average, while the rest of the world, so U.

Speaker 3

S. And Europe, grew in the 50% Range or so, so way out growing the overall company. And these type of Trends, we have been seeing for some time. And as I said, there is no big variations quarter to quarter given the long sales cycle. And we would expect something like that to continue happening.

Speaker 3

So again, we give the detailed disclosure On a yearly basis, so I think this is what we can explain on a qualitative basis here on the quarter. And for the second question about competition, I'll pass it over to Mariano.

Speaker 6

So about competition, we are not Seeing a different landscape for competition and let's be more specific by region. We are not seeing any new names in Europe, In U. S, LATAM and Brazil, they are all the same. We as we are increasing our penetration in B2B, Yes, we are seeing old names of B2B that now for us is a new competition in the B2B space, Mainly in the United States. But no, the market stays with the same names.

Speaker 6

The only major Kind of a public notice was a oracle kind of moving out of the commerce environment, But no further kind of a new competitor in the market.

Speaker 1

Okay, very clear. Thank you for your answers.

Speaker 4

And our next question comes from the line of Maddy Schrag from KeyBanc. Please go ahead.

Speaker 8

Hey, guys, and thanks for taking my question. I'm happy to hear that sales cycles have kind of come back to normalized levels. Just wondering if your guidance assumes this recovered level in your sales cycles? And then my second question is, wondering if you guys could give some color On the ramp speeds of your new go lives and wondering if that's seen some recovery too or if we're still seeing merchants kind of pull back on

Speaker 3

Hi, Mehdi. Thanks for your question. So on the sales cycle, we mentioned in the both in the earnings release and in the prepared remarks that we have seen And encourage stabilization of the sales cycle. They have not gone back to normal to historical levels. They are still slightly above, but we are seeing an encouraged trend with this stabilization, right?

Speaker 3

So that's what we are seeing. Now the go lives and ramp ups, it's we are including that in the overall cycle, as we mentioned, right? So we are seeing a similar trend There as well. So this is encouraged to see. So On what's building to the guidance, right, both Q3 and 2023 guidance assume The same store sales from existing customers in line with current levels as well as continued stabilization of the sales cycle From new customers, not yet going back to normal, but a continuous stabilization.

Speaker 3

And if you look back at previous quarters, you will notice That our Q3 FX neutral guidance was the same as Q1 and Q2. While we have increased the 2023 FX neutral guidance From 15% to 19% to 16% to 19% last quarter and now to 18% to 20%. Having said that, market conditions remain uncertain. For instance, given the holiday shopping events of Q4 is hard to predict the promotional behavior and therefore the GMV from our customers under the current retail market setup. And finally, I would say that we are confident that we are well positioned to capture the digital market opportunity.

Speaker 3

Although we have seen some volatility in same store sales, our existing customer base has continued to outperform the market, And we are seeing good new customer sales momentum that should continue supporting our growth going forward.

Speaker 8

Great. Thanks, Ricardo. Appreciate it.

Speaker 4

Thank you. And with no further questions, I'd like to turn the floor back over to our presenters for closing remarks.

Speaker 2

The collective effort of our dedicated team, loyal customers and partners have propelled us into new heights in commerce transformation. Our customers' base has consistently showcased remarkable resiliency, Serving as a testament to the strength and reliability of the Vitex platform, the consistent low annual revenue churn We have experienced highlight the unwavering trust our customer place in us. This, in turn, has enabled us to foster our robust and sustainable business model, positioning us as for continued growth. The macroeconomic environment poses a huge charge for enterprise and retailers to meet their operational and financial targets. This represents an opportunity for Bitext.

Speaker 2

Legacy players dominant in the past are now See the outdated providers that enterprises and retailers actively seek to migrate away. On the other hand, emerging headless sprayers aren't the best options either, as even though they Offer great customization, it comes with complexity and high operating costs. We stand out by offering a composable and complete platform that combines the best of both worlds, with an offering that solves just about what enterprise and retailers are looking for. Together, we're shaping remarkable customer experiences and solidifying our position as leaders in the e commerce industry. Thank you, everyone, for joining us today.

Speaker 2

We look forward to keep you updated in our next earnings call. Have a wonderful week.

Speaker 4

Thank you. And once again, ladies and gentlemen, that does conclude today's call. Thank you all for joining. You may now disconnect.

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Earnings Conference Call
VTEX Q2 2023
00:00 / 00:00