VTEX Q2 2025 Earnings Report

VTEX EPS Results

• Actual EPS: $0.02
• Consensus EPS: $0.02
• Beat/Miss: Met Expectations
• One Year Ago EPS: N/A

VTEX Revenue Results

• Actual Revenue: $58.80 million
• Expected Revenue: $60.35 million
• Beat/Miss: Missed by -$1.55 million
• YoY Revenue Growth: N/A

VTEX Announcement Details

• Quarter: Q2 2025
• Date: 8/7/2025
• Time: After Market Closes
• Conference Call Date: Thursday, August 7, 2025
• Conference Call Time: 4:30PM ET

VTEX (NYSE:VTEX) provides software-as-a-service digital commerce platform for enterprise brands and retailers. Its platform enables customers to execute their commerce strategy, including building online stores, integrating, and managing orders across channels, and creating marketplaces to sell products from third-party vendors. It has operations in Brazil, Argentina, Chile, Colombia, France, Italy, Mexico, Peru, Portugal, Romania, Singapore, Spain, the United Kingdom, and the United States. VTEX was founded in 2000 and is headquartered in London, the United Kingdom.

VTEX Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: VTech raised its full-year non-GAAP operating income and free cash flow guidance by over 10% after delivering resilient Q2 operational profitability.
• Positive Sentiment: Gross profit rose 15.2% in FX-neutral terms to $45.3 million, driving a 3.5 percentage-point margin expansion, while non-GAAP operating income grew 46% FX-neutral to $8.5 million.
• Negative Sentiment: Subscription revenue reached $57.2 million (11% FX-neutral growth) but missed the FX-neutral guide as Argentina GMV reversed and Brazil saw a mix shift to lower take-rate enterprise clients.
• Positive Sentiment: Global expansion momentum accelerated with the Whirlpool partnership for the KitchenAid US launch and new enterprise customer wins in the US and Europe, which are growing twice as fast as the overall business.
• Positive Sentiment: VTech completed $78.2 million in share repurchases on 16 million shares and secured board approval for an additional $40 million buyback program.

Presentation

[Julia Fernández, VP - IR at VTEX]

Hello, everyone, and welcome to VTech's earnings conference call for the 2025. I'm Giulia Barro Fernandez, VP of Investor Relations. Joining me today are Gerardo Tomas Jr, our Founder and Co CEO and Ricardo Camatassodre, our Chief Financial Officer. Also joining us for the Q and A session are Mariana Vomira de Feria, Founder and Co CEO and Andres Polidoro, Chief Strategy Officer. Before we begin, please note that today's remarks may include forward looking statements.

[Julia Fernández, VP - IR at VTEX]

These statements are based on our current assumptions and projections and actual results may differ. Additional information regarding risks and uncertainties is detailed in our Form 20 F for the year ended 12/31/2024 and other filings with the SEC, all of which are available on our Investor Relations website. During this call, we may also reference certain non GAAP financial measures. Reconciliations to the most comparable GAAP figures can be found in our Q2 twenty twenty five earnings press release also available on our Investor Relations website. With that, let me turn the call over to Gerardo. Gerardo, the floor is yours.

[Geraldo do Carmo Thomaz, Co-founder, Co-CEO & Co-Chairman at VTEX]

Thank you, Julia. Welcome everyone and thanks for joining our second quarter twenty twenty five earnings conference call. Vitex continued to deliver resilient performance driven by disciplined execution and relevant progress on our global expansion. Despite the challenging market for our retailer base in Brazil and Argentina and more gradual overall market demand from new customers migrations, our AI initiatives on support cost efficiency combined with our disciplined execution delivered the quarter of resilient operational profitability. As a result, we have raised our non GAAP income from operations and free cash flow guidance by over 10%.

[Geraldo do Carmo Thomaz, Co-founder, Co-CEO & Co-Chairman at VTEX]

On the global expansion front, we're excited to highlight key developments this quarter, including the expansion of our partnership with Whirlpool in The U. S. For the launch of the KitchenAid website and the addition of the new enterprise customers across both The U. S. And Europe.

[Geraldo do Carmo Thomaz, Co-founder, Co-CEO & Co-Chairman at VTEX]

It is encouraging to see The U. S. And Europe large and attractive markets growing twice as fast as the overall company. Turning to subscription revenue, we recorded $57,200,000 representing 11% year over year increase in FX neutral. That's within our guidance in U.

[Geraldo do Carmo Thomaz, Co-founder, Co-CEO & Co-Chairman at VTEX]

S. Dollars, but below on an FX neutral basis. From a GMV perspective, this performance was primarily impacted by Argentina where the early signs of recovery team in the first quarter did not continue with the second quarter reflecting a reversal on that trend. Additionally, we observed the mix shift in Brazil. New and large customers that have a lower implied take rate demonstrated greater resilience amid the high interest rate environment.

[Geraldo do Carmo Thomaz, Co-founder, Co-CEO & Co-Chairman at VTEX]

While this shift has an overweight impact on GMV growth, it translated into a more modest contribution to revenue. Despite the challenging market, the continued resilience and scalability of our business model enable us to maintain strong financial discipline and operational leverage. Our gross profit reached $45,300,000 up 15.2% in FX neutral, representing a 3.5 percentage points margin increase year over year. Our non GAAP income from operations increased by 46% in FX neutral to $8,500,000 representing a 14.4 margin and a 3.3 margin increase versus the same quarter of last year. This resilient operational profitability and stable churn levels give us the confidence and capacity to double down on strategic initiatives that will fool our next phase of growth.

[Geraldo do Carmo Thomaz, Co-founder, Co-CEO & Co-Chairman at VTEX]

We're actively investing in B2B commerce and retail media to high potential under penetrated areas that are already unlocking new revenue streams and reinforcing our position as a key partners to enterprise brands. Combined with the progress of our global expansion, these initiatives form a powerful engine for scalable value creation. Together, they reflect a disciplined growth strategy that positions Vitex to capture significant upside in the years ahead. Moving to our commercial and product update for the quarter. In Q2, we successfully brought several new customers live including Aloy Yoga, Amigos Supermercados, Droga Last and Lindity in Brazil, Shop AZ in Kosovo, Freixe in Mexico, Cash Be Scenes in France, Delta House in Portugal, Road Runner Sports and American Water Resources in The US.

[Geraldo do Carmo Thomaz, Co-founder, Co-CEO & Co-Chairman at VTEX]

We also strengthened relationship with key existing customers. Hinode Group added a b to b store in Colombia, now running b to b and b to c models across four countries in Latin America. Kinu continued to expand its b to b presence across Europe, adding Sweden and Norway to its Germany, Belgium, France, Netherlands and UK operations. LG launched the new store in Ecuador, expanding its presence across Latin America. Vest launched stock in Brazil, their multi brand outlet that offers discounted items from across the group's premium fashion labels, expanding its portfolio of Vitex stores that already includes Lely, Bobo, John John, Dudalina and individual.

[Geraldo do Carmo Thomaz, Co-founder, Co-CEO & Co-Chairman at VTEX]

Whirlpool launched its KitchenAid in The US, marking its first US store launch with Vitex while continue our global relationship in over 20 countries. This recent go live highlight the global competitiveness of our platform as we deepen adoption with existing customers, attract new ones, and expand our network of partners. This was clear on display at VTech's Day twenty twenty five, where 25,000 participants experienced how our ecosystem is coming together to power real world commerce across b to b, b to c, and hybrid models. Building on that energy, we're now set to launch the latest edition of Vitex Vision, our digital initiative designed to provide visibility into our product roadmap and demonstrate how our innovation priorities are directly aligned with customers' need. Together, these two initiatives reflect meaningful progress across four strategic pillars, B2B Commerce, Retail Media, Omni channel and AgenTech Commerce.

[Geraldo do Carmo Thomaz, Co-founder, Co-CEO & Co-Chairman at VTEX]

First, b to b commerce remains one of our top strategic priorities. We are introducing a newly e architecture b to b buyer portal designed to solve for the complexity of corporate purchase. It includes embedded tools for governance such as multilevel organizational management, budgeting controls and approval based workflows alongside native Panchalta integration to connect seamlessly with external procurement system. These innovations allow large organizations to scale purchasing through efficient self-service experience while maintaining compliance and overall oversight. Second, retail media is emerging as a transformative force in digital commerce, and we are positioning VTech Ads as a fully integrated monetization engine.

[Geraldo do Carmo Thomaz, Co-founder, Co-CEO & Co-Chairman at VTEX]

As retailers seek new profit levers and advertisers demand measurable outcomes, our platform is introducing features such as video ad formats, off-site traffic integrations and in store media activations. We're also entering a strategic partnership with Globo integrating VTech's ads with Brazil largest media network to enable high impact campaigns. These advancements elevate Vitex beyond commerce infrastructure to become the operating system for retail media monetization. Third, omnichannel commerce, which remains a cornerstone for our product strategy as enterprise needs to unify digital and physical experiences. We are introducing AI powered semantic search and product recommendations designed to increase conversion through contextual intent based discovery.

[Geraldo do Carmo Thomaz, Co-founder, Co-CEO & Co-Chairman at VTEX]

New in store innovations such as step on phone, transform mobile device into secured payment terminals for assisted selling. Additionally, the deliver promise feature enables shoppers to view fulfillment options filtered by speed, location and method directly from the search of product detail page. These capabilities reinforce our commitment to delivering seamless personalized commerce experiences at scale. Last but not least, agent ecommerce is redefining operational agility for our customers. We're introducing AI agents that automate core workflows, reduce complexity, and accelerate time to value.

[Geraldo do Carmo Thomaz, Co-founder, Co-CEO & Co-Chairman at VTEX]

This include a customer service agent powered by WEN, capable of resolving inquiries across channels like WhatsApp, Instagram, and email. A visual editor agent that empower non technical teams to modify storefronts in real time without code. And a data insights agent that surface real time business intelligence through natural language queries. With these capabilities embedded into the Vitex platform, we are enabling enterprise customers to scale with precision and unlock new efficiencies through intelligent automation. These highlights are just a glimpse of the powerful innovations we're bringing to the market.

[Geraldo do Carmo Thomaz, Co-founder, Co-CEO & Co-Chairman at VTEX]

To discover the full breadth of product releases and strategic advancements, we invite you to stay tuned for the upcoming edition of Vitex Vision. But innovation for us is never an end in itself. Every product we build, every capability we introduce is guided by a single objective, delivering extraordinary outcomes for our customers. Now let's take a look on how this vision translate into measurable impact on the ground through customer success stories that reflects real value for our platform. Whirlpool launched a KitchenAid commerce site in The US, marking the customer's first VTech implementation in the market.

[Geraldo do Carmo Thomaz, Co-founder, Co-CEO & Co-Chairman at VTEX]

More than a platform migration, Whirlpool's launch of KitchenAid in The US marketed strategic shift to a modular, scalable commerce architecture. The headless site integrates with four distribution centers for nationwide fulfillment and connect seamlessly to ERP, PIN, CRM, and pricing system via a robust middleware layer. The checkout experiences is also fully headless, supporting multiple payment methods including credit card, PayPal, and buy now pay later solutions. The platform also enables enhanced customer experiences such as headless login, product personalization through engraving, gift wrapping options, and a range of warranty plans, all natively support within Vitex. With the rollout, KitchenAid improved its site performance and reduced development overhead while establishing a standardized architecture that is already accelerating future deployments over in other markets.

[Geraldo do Carmo Thomaz, Co-founder, Co-CEO & Co-Chairman at VTEX]

The Delta House, Portugal's most iconic coffee brand marked the brand's first venture into commerce with a greenfield project powered by Vitex. More than just an online coffee store, Delta House offers a curated selection of products across categories like wine, beers, water, soft drinks, and snacks, delivering an experience that capture the quality warmer and heritage of the Delta brand. Vitex was selected for its flexibility in designing personalized user journeys, It supports for multiple payment methods and its native features such as speaker points allowing the branch to engage customers in new interactive ways. One of the key differentiators of Vitek's unified admin, which enables Delta's team to manage logistics, payments, marketing, and customer service from a single integrated environment. With a future ready architecture and a seamless shopping experience, the Delta House brings the Delta Cafe spirit online, connecting tradition and innovation while laying a solid foundation for digital growth.

[Geraldo do Carmo Thomaz, Co-founder, Co-CEO & Co-Chairman at VTEX]

Roadrunner Sports, a leading US specialty retailer operating since 1983, modernized its e commerce operation by migrating from a legacy platform to Vitex, adopting a headless API first architecture built to unify digital and physical channels. Rather than replatforming all at once, the company opted for a phased migration strategy. First, moving its ecommerce engine to Vitex and now progressive adopting native capabilities. The new architecture features a fully decoupled front end integrated with third party services, while VTech manages core commerce functions like catalog pricing and promotion. This implementation unlocked faster innovation and efficiency for roadrunner sports, turning a complex tech stack into a scalable, streamlined, and future proof operation.

[Geraldo do Carmo Thomaz, Co-founder, Co-CEO & Co-Chairman at VTEX]

Espasso Smart, a leading provider of industrialized construction systems in Brazil expanded its digital capabilities with the launch of a B2B commerce channel powered by Vitex. After identifying that a large share of enterprise customers were using its b to c site, the company built a tailored experience for professional buyers such as contractors, installers, distributors. Leveraging the VTech B2B suite, the new channel offers features like customer segmentation, personalized pricing, quick reordering and digital quotation requests, all designed to reduce negotiation time and increase purchase frequency. By assigning customer commercial terms during the client onboarding, SpasoSmart eliminated repetitive negotiations while enabling recurring order with greater speed and confidence. The operation is fully integrated with company's ERP ensuring control over pricing, taxes and inventory, while also supporting omni channel coordination with its 43 physical stores.

[Geraldo do Carmo Thomaz, Co-founder, Co-CEO & Co-Chairman at VTEX]

With 60% of its product portfolio manufactured in house, the company delivers both efficiency and reliability to its b to b clients. This new channel not only improves operational agility and customers insights, but also advances Esparza's smart mission to make modern sustainable constructions more accessible and scalable. Retail media is another area where we've seen meaningful evolution. Detect ads delivers value across the full ecosystem both for publishers and advertisers. Two standout examples, Bmall, a leading Brazilian retailer leveraging VTech's ad to monetize its digital storefronts and racket, a global consumer goods company driving performance to target retail media activations.

[Geraldo do Carmo Thomaz, Co-founder, Co-CEO & Co-Chairman at VTEX]

The mall ads is transforming the mall ecommerce operation into a powerful monetization engine. In its largest campaign, they activated the sponsored products, dynamic banners and more advertising formats, generating over BRL1 million in incremental sales and achieving an outstanding roles above 40 apps. Success came from precise targeting, dynamic CPC management and strong collaboration fueled by regional demanding sites and real time optimization. Racket chose Vitex ad network to scale its retail media strategy, achieving a breakthrough in performance and media efficiency, particularly within the complex pharmaceutical channel. By moving from fragmented media buys to a fully integrated data driven approach, Rakuten activated campaigns across 19 retail partners resulting in seven fold increase in retail media driven sales and a five fold boost in campaign activity, both while tripling its rollers.

[Geraldo do Carmo Thomaz, Co-founder, Co-CEO & Co-Chairman at VTEX]

With the structured inventory, flexible format and real time optimization, Vitek Ads enabled Record to align media, data and operations, establishing a scalable high impact retail media engine across the region. Now to wrap up before passing the floor to Ricardo, I would like to take a moment to recognize the dedication of our 1,283 VTechs whose talent and commitment are instrumental in bringing our vision to life. I also want to extend my sincere gratitude to our customers, partners and investors for their continued trust and collaboration. With that, I will hand the call over to Ricardo.

[Ricardo Camatta Sodré, CFO at VTEX]

Thank you, Geraldo. Hi, everyone. I'm pleased to share with you Vitek's Q2 twenty twenty five financial results. In the 2025, GMV reached 4,800,000,000 growing 9% year over year in U. S.

[Ricardo Camatta Sodré, CFO at VTEX]

Dollars and 14% on an FX neutral basis. This led to subscription revenue reaching $57,200,000 compared to $54,000,000 in Q2 of last year, a 6% increase in U. S. Dollars and 11% on an FX neutral basis. As mentioned by Gerardo, subscription revenue for the quarter came in within guidance in U.

[Ricardo Camatta Sodré, CFO at VTEX]

S. Dollars, but below on FX neutral basis. From a GMV perspective, that's driven primarily by a reversal in Q2 of the recovery trend we started to see in Q1 in Argentina. From a subscription revenue perspective, we also saw a mix shift in Brazil with new and larger customers gaining representation. Although these customers have lower implied take rates that represented a more limited contribution to our revenue growth in Q2, our scalable model results in similar margins, which is clearly demonstrated by our gross margin improvements.

[Ricardo Camatta Sodré, CFO at VTEX]

While this challenging market environment introduced short term headwinds, it also underscores the strength and resilience of our business model. Designed for scalability and efficiency, our model allow us to navigate volatility while protecting operational profitability. We have maintained a disciplined execution, while continue to invest strategically in our platform and global expansion. This balanced approach drove meaningful margin expansion and further validated the operating leverage embedded in our model. Reflecting these dynamics, our non GAAP subscription gross margin reached 80% in Q2 twenty twenty five, up 180 basis points year over year from 78% in Q2 twenty twenty four.

[Ricardo Camatta Sodré, CFO at VTEX]

This expansion continues to be driven primarily by gains in customer support efficiency, where we are further scaling AI powered automation to improve service quality while reducing support costs. This trend reinforces our commitment to operational excellence and position us to sustain strong margin performance over the long term. Our total gross margin, which includes services rose to 77%, up three fifty basis points year over year compared to 74% in Q2 twenty twenty four. Aside from the subscription gross margin gains, which I just described, our overall gross margin also keeps benefiting from a declining mix of services revenue as we increasingly leverage our ecosystem of partners to support implementation projects. Turning to expenses, as I mentioned before, we remain firmly committed to discipline management while allocating capital strategically to support long term growth and innovation.

[Ricardo Camatta Sodré, CFO at VTEX]

In Q2, non GAAP operating expenses totaled $37,000,000 representing a 4% increase year over year. This quarter we had flattish G and A and sales and marketing expenses contributing to a two percentage point year over year reduction in their combined weight as percentage of total revenue. This efficiency created additional room to support our continued investments in R and D focused on expanding and enhancing our platform capabilities. This balance between discipline and strategic investments continues to deliver results. Non GAAP income from operations reached $8,500,000 up from $6,300,000 in Q2 twenty twenty four, representing an increase of 35% in U.

[Ricardo Camatta Sodré, CFO at VTEX]

S. Dollars. These drove a three percentage points year over year margin expansion, resulting in a 14% non GAAP operating margin for the quarter. Vitex results underscores our commitment to profitable growth and reflect the positive trajectory of our financial model, even in a more complex and volatile business environment. Our financial discipline also translate into strong cash generation, reinforcing the efficiency and resiliency of our cash conversion profile.

[Ricardo Camatta Sodré, CFO at VTEX]

Free cash flow for the quarter was $7,100,000 up from $3,000,000 in the same quarter of last year, resulting in a free cash flow margin of 12%, an improvement of seven percentage points year over year. On a year to date basis, free cash flow was $13,800,000 remaining very aligned with our year to date non GAAP income from operations. In this slide, disciplined capital allocation remains a key priority as we focus on delivering long term value to our shareholders. This quarter, we concluded the share repurchase program authorized by our Board of Directors in December 2024, executed as part of our broader capital allocation strategy to maximize shareholder returns. In Q2, we repurchased 800,000.0 shares at an average price of $4.82 per share.

[Ricardo Camatta Sodré, CFO at VTEX]

Considering the current and the previous year's share repurchase activities, total shares repurchased reached 16,000,000 with an average price of $4.86 per share and a total cost of $78,200,000 On 07/31/2025, our Board of Directors authorized an additional share repurchase program for an aggregate consideration of up to $40,000,000 As we look ahead, we continue to navigate a challenging market environment. The volatility observed in Q2, particularly the reversal of recovery in Argentina and the mix shift in Brazil alongside isolated contract cancellations and slower decision making cycles among retailers and brands has introduced additional impact into near term revenue forecasts. Nevertheless, we remain confident in our competitive positioning, our global expansion strategy and the resilience of our business model. With a focus on innovation, efficiency and scalability, Ditex is well positioned to capture the long term trends shaping global commerce. With that in mind, for the 2025, we are targeting FX neutral year over year subscription revenue growth in the range of 6% to 9%, implying a range of $57,500,000 to $59,000,000 For the full year 2025, we are now targeting FX neutral year over year subscription revenue growth of 9% to 12% implying a range of $233,000,000 to $239,000,000 based on July's average FX rate.

[Ricardo Camatta Sodré, CFO at VTEX]

Turning to our margin outlook, backed by disciplined cost and expense management and ongoing operational efficiencies, we are raising our full year 2025 outlook for non GAAP income from operations and free cash flow margins to the high teens, reflecting the strength of our execution and the scalability of our platform. With that, although we are reviewing our subscription revenue forecast by 2% in U. S. Dollars, we are increasing our non GAAP income from operations and free cash flow in dollar amounts by more than 10%. To conclude, our Q2 performance reinforces the resilience of our business model, disciplined execution and long term growth foundation.

[Ricardo Camatta Sodré, CFO at VTEX]

We are particularly encouraged by the relevant progress in The U. S. And Europe and the attractive long term opportunity in B2B and retail media. Despite a challenging market, Vitex remains well positioned with a globally competitive platform, a clear strategy and an increasing relevance among global enterprise brands. With that, let's open it up for questions now. Thank you.

[Operator]

Thank you. Right. Looks like our first question today comes from the line of Marcelo Santos with JPMorgan. Marcelo, please go ahead.

[Marcelo Peev Santos, Senior sell-side Equity Analyst - TMT & Education at JP Morgan Chase & Co]

Hi, good evening. Thanks for taking my questions. I have two, both regarding the guidance. So could you please discuss the decline in the guidance in terms of GMV and new subscriptions sold? Like I'm just trying to break down how much is the growth in GMV of your clients, the variable component of your revenues?

[Marcelo Peev Santos, Senior sell-side Equity Analyst - TMT & Education at JP Morgan Chase & Co]

And how much would that be due to a longer time to close new contracts and to bring new clients in? And the second, in the margin increased margin expectations, could you please discuss more in detail which are the lines that are scaling the most or using most benefit that give you confidence that this increased margin will come? Thank you.

[Ricardo Camatta Sodré, CFO at VTEX]

Thanks Marcelo. Let me walk you through the context behind our Q3 guidance and the full year outlook. So our Q3 and fiscal year twenty twenty five guidance reflects a couple of factors we are closely monitoring, yes, as you mentioned in your question. So the first factor is the GMV performance of our existing customers, a variable that we have limited control over. So starting with our customer base in Argentina, after signs of recovery in q one, q two reversed back to negative double digit GMV year over year FX neutral growth, prompting the change in our outlook.

[Ricardo Camatta Sodré, CFO at VTEX]

And moving to to Brazil, we are seeing a continued mix shift towards, you know, larger enterprise customers. This is strategically positive, but with, you know, softer near term revenue conversion due to the lower implied take rate, although we're still, you know, attractive margins. And it's important to know that while we don't control, we we can always predict the GMV performance of our existing customers. We are increasing our efforts to work more closely with them, supporting the execution of their strategies and unlocking additional growth opportunities through the platform. The second factor driving a significantly smaller impact is that we are also seeing softer overall market migrations and a view isolated contract cancellations tied to high risk implementations.

[Ricardo Camatta Sodré, CFO at VTEX]

While some of these projects may still come true, we excluded them from our near term forecast given what we see as the most likely scenario. And it's important to mention that, you know, although we see some isolated cancellations, the most strategic projects we have under implementation remain on track. So all in, these dynamics drove, you know, a five percentage point revision in our FX neutral subscription growth guidance for the year and equivalent to a 2% U. S. Dollar revenue adjustment at the midpoint of our guidance.

[Ricardo Camatta Sodré, CFO at VTEX]

And as I said, the large majority of the FX neutral impact comes from the Argentina and Brazil GMV effect with a much smaller portion coming from the softer overall market demand and a few isolated contract cancellations. That said, we expect some acceleration in Q4 supported by easier comps and continued traction in The U. S. And Europe. And then with that, on the profitability side, which is also part of our guidance, our updated guidance highlights the strength of the model.

[Ricardo Camatta Sodré, CFO at VTEX]

Despite reducing 2025 revenue guidance by 2% in U. S. Dollars in the midpoint, we raised our full year non GAAP operating income and free cash flow margin outlook by over 10% in dollar amounts. So this speaks to the durability of our platform, the disciplined execution and our ability to deliver profitable growth even in more complex conditions. And on where the margin improvement is coming Marcelo, year to date our non GAAP operating income margin is up approximately four percentage points versus last year, driven by no gains in the AI support automation, more autonomous implementations and the ecosystem maturity.

[Ricardo Camatta Sodré, CFO at VTEX]

So, a lot of it coming from the gross margin side. On the expense side, despite investing more in R and D, G and A and sales and market sales and marketing are flat year over year in absolute terms. And the latter, sales and marketing had some headcount reduction in the first half of the year that should show some savings in the second half of the year. And for context, you know, like we ended 2024 with 13% non GAAP operating margin. And that combined with what I just mentioned position us on track to reach high teen margins for 2025, supporting our decision to raise the full year operating income and free cash flow margin guidance as we did.

[Ricardo Camatta Sodré, CFO at VTEX]

So this margin expansion are only boosting all the profitability, but also creates room to invest in high impact r and d areas like b to b, retail media, and H and A commerce like Gerald mentioned in the prepared remarks. So it's a clear validation of our ability to scale with discipline and drive long term shareholder value.

[Marcelo Peev Santos, Senior sell-side Equity Analyst - TMT & Education at JP Morgan Chase & Co]

Perfect. Thank you very much.

[Operator]

All right. Thank you, Marcelo. And our next question comes from the line of Luca Brendam with Bank of America. Luca, please go ahead.

[Lucca Brendim, Equity Research Associate at Bank of America]

Hi, good afternoon. Thank you for taking my questions. I also have two here. Following on the similar line to Marcelo, on the larger clients on The U. S.

[Lucca Brendim, Equity Research Associate at Bank of America]

That you and Europe that you mentioned would be coming in, in the next few quarters. Were there any changes in terms of when those will be coming live, maybe a delay? And if that was implicit in the guidance in some way? Or when we're talking about those clients, we should expect something similar? And if the isolation the isolated cancellations were also in one of those clients?

[Lucca Brendim, Equity Research Associate at Bank of America]

And then a second more on a structural level, if you guys are seeing any changes in terms of competition in any particular region with the new competitors that are growing in LatAm or if you continue to see similar trends overall? Thank you.

[Geraldo do Carmo Thomaz, Co-founder, Co-CEO & Co-Chairman at VTEX]

Okay. Thank you for the question. On the implementation cycle, we are not seeing any change, significant change. Despite the macro volatility, we the projects undergoing, we don't see any kind of shorten or enlargement of the implementation cycle. Of course, we are signing more enterprise deals in U.

[Geraldo do Carmo Thomaz, Co-founder, Co-CEO & Co-Chairman at VTEX]

S. And Europe, and it's growing twice as the Latam business. And the Tier one clients have a larger implementation cycle, but it's already in the guidance. On the competition, we are seeing traction in our international strategic markets, means U. S.

[Geraldo do Carmo Thomaz, Co-founder, Co-CEO & Co-Chairman at VTEX]

And Europe. So the highlights growing momentum is our global expansion confirms that our platform is resonating in more mature competitive regions. A key milestone that makes the point on that was the launch of KitchenAid e commerce website in The United States. Whirlpool has been a long time Vitex partner, but this marks their first implementation with us in The U. S, a strong validation of our platform.

[Geraldo do Carmo Thomaz, Co-founder, Co-CEO & Co-Chairman at VTEX]

We are very focused on making KitchenAid a customer success and turning this into a reference implementation. Alongside it, we are also bringing online large scale customers with billions in annual GMV, which should further boost momentum and credibility. In Europe, we had several go lives this quarter and continue progressing towards the highly anticipated Manchester City Football Club project. These milestones reflect our rising strategic relevance in the region. Across both regions, construction signing momentum is solid.

[Geraldo do Carmo Thomaz, Co-founder, Co-CEO & Co-Chairman at VTEX]

The pipeline is growing. And while we made significant strides, we're still just getting started in those regions. To finish, Vitex position as a complete and composable platform is maturing and matching the demand of enterprise B2C and B2B platforms in The U. S. And EMEA. I hope I answered the question.

[Lucca Brendim, Equity Research Associate at Bank of America]

Very clear. Thank you for the answer.

[Operator]

Okay. Thank you very much. And we will pause just a moment for further callers. Okay. Going once, going twice.

[Operator]

Ah, it appears there is another caller, and that is, Maria Infantazi with, Itau. Maria, please go ahead.

[Maria Clara Infantozzi, Equity Research Associate at Itau BBA]

Hi, guys. Thank you for the opportunity. I have two questions. The first one related to Argentina. Can you give us more color on the main drivers for the deterioration in the operating momentum of the region?

[Maria Clara Infantozzi, Equity Research Associate at Itau BBA]

Can you please comment on how you perceive the competitive landscape evolving in the region? And also regarding Brazil, I just wanted to ask you guys to tell us how you calibrate for a potential consumption deceleration in Brazil in the second half of the year in your current guidance, please? Thank you.

[Ricardo Camatta Sodré, CFO at VTEX]

Hi, Maria. As as a reminder, we don't disclose regional performance on a quarterly basis. We disclose annually. But I can, you know, give directionally commentary for, you know, what we are seeing in the in the Argentina. And then once we have the full year, which is we can go into more details.

[Ricardo Camatta Sodré, CFO at VTEX]

So so Argentina was, you know, a significant drag this quarter. As I mentioned in the prepared remarks, in q one, we saw promising signs of GMV growth recovery from our customer base in Argentina. To give you a sense, the GMV FX neutral year over year growth started Q1 in the double digit negative range and exited in the high single digit positive range by March. So we expected that trend to at least keep stable in Q2, But instead, the recovery reversed for our customer base and GMV growth fell back, you know, to the double digit negative territory in Q2. And given that, you know, there is the hot sales event in in May, Argentina has a heavier weight in Q2.

[Ricardo Camatta Sodré, CFO at VTEX]

So this reversal had a meaningful impact for us. So Argentina remains a volatile market. Now we still remain focused on the long term opportunity of gaining share, supporting our customers and driving additional adoption. And we weathered volatility in the region before and emerged stronger by staying close to our customer base and executing with discipline. So on the overall, you know, competitive competitive landscape in the in the market, looking at other digital commerce platforms, we don't see any any changes specifically in Argentina on the competitive landscape.

[Ricardo Camatta Sodré, CFO at VTEX]

And then maybe if you could repeat on your second question, please?

[Maria Clara Infantozzi, Equity Research Associate at Itau BBA]

Sir, thank you for your answer. Just regarding the operating trends in Brazil for the second half of the year, I just wanted to make sure how do you calibrate your expectations for a potential deceleration of consumption in the second half of this year? Thank you.

[Ricardo Camatta Sodré, CFO at VTEX]

Perfect. Perfect. Yeah. Great question. So in Brazil, we did see some same store sales deceleration in in q two.

[Ricardo Camatta Sodré, CFO at VTEX]

Although the total GMV effect neutral growth in Brazil was in the low twenties and pretty stable versus q one because we now have new customers joining. But we had that mix shift towards new and larger enterprise customers with lower implied take rates that I that I mentioned on the prepared remarks. So we are assuming a deceleration in the second half given how we saw the same store sales deceleration in the second half of the year. Now there's a lot of moving pieces here with the interest rates and FX and other political and macroeconomic points, right? So it's hard for us to forecast the GMV of our customers, but we are embedding in the guidance some deceleration in the second half of the year for Brazil given for how long the interest rates have been high in the country.

[Maria Clara Infantozzi, Equity Research Associate at Itau BBA]

And how does this compare with the fourth quarter results of the past year? Sorry to just follow-up.

[Ricardo Camatta Sodré, CFO at VTEX]

Yes. So we saw deceleration of same store sales in Q4 of last year. I would say that Q1 was more aligned. We saw more deceleration in Q2, and so we are embedding that to the second half of the year as well.

[Maria Clara Infantozzi, Equity Research Associate at Itau BBA]

Great. Thank you.

[Operator]

Thank you, Maria. And our final question today comes from the line of Gustavo Farias. Gustavo, please go ahead.

[Ricardo Camatta Sodré, CFO at VTEX]

Gustavo, are you there?

[Gustavo Farias, Associate Director at UBS Group]

Hi, everyone. Good evening. Thanks for taking my question. I'll stick to one. So the company has been very vocal about B2B, including during the tax day and retail media as well in this recent one.

[Gustavo Farias, Associate Director at UBS Group]

Considering this recent market volatility, if you could comment on if and how anything has changed in the in the strategy and the pace of the rollout of those solutions with clients? Thank you.

[Geraldo do Carmo Thomaz, Co-founder, Co-CEO & Co-Chairman at VTEX]

Hello, Gustavo. How are you? So so although this all these these two initiative, they did they're not they don't market economics in my perspective, but there's there's no big structural change in the market. Actually, if there is a structural change in the market, it will be to reinforce the value proposition of both these these initiatives. As as you know, like, media is key for any, retailer to be sustainable and profitable during the new phase of commerce.

[Geraldo do Carmo Thomaz, Co-founder, Co-CEO & Co-Chairman at VTEX]

Like, you need to monetize your your personal inventory. You need to monetize your your data, your proprietary data. And and especially, like, if you if you consider the the current macroeconomic conditions, this is a must have for all the retailers, across the globe, including other retailers. On b two b, this is a trend that we're seeing. Like, people did they spent some investment, like, twenty years ago or ten years ago in b to b in the in The US and Europe.

[Geraldo do Carmo Thomaz, Co-founder, Co-CEO & Co-Chairman at VTEX]

Now they're open to renew because the in legacy solutions. And we've seen in Brazil, like, people wanting to have self-service portal, serving the customer for the for the digital channel, and this, is at at a second trend. It it it's not related to to the conjecture. So the strategy is the same. All these macroeconomic shifts are not informing any new actions on this on this, two ventures.

[Gustavo Farias, Associate Director at UBS Group]

All right. Very clear. Thank you.

[Operator]

Thank you, Gustavo. And that does conclude our Q and A session today. I will now turn the call back over to Geraldo Thomas for closing remarks. Geraldo?

[Geraldo do Carmo Thomaz, Co-founder, Co-CEO & Co-Chairman at VTEX]

Thank you for the great questions. Before we close, I want you to leave you with the confidence we have in Vitex directions and long term vision. Our bold product path like B2B and retail media redefine how enterprises operate and monetize, while AgenTek commerce is bringing AI powered autonomy into the press. These innovations aren't incremental. They're foundational shift designed to meet the real world needs of global brands.

[Geraldo do Carmo Thomaz, Co-founder, Co-CEO & Co-Chairman at VTEX]

We're also seeing that vision translates into results. We are making relevant progress in The U. S. And Europe and we're just scratching the surface of the opportunity. With a growing base of high quality customers and a platform built to scale, our long term outlook is strong.

[Geraldo do Carmo Thomaz, Co-founder, Co-CEO & Co-Chairman at VTEX]

We're more committed than ever to delivering enduring value to our customers, partners and shareholders. Thank you for your continued trust. We look forward to the road ahead. The best of VTech is still to come. Thank you for your continued support and partnership.

[Geraldo do Carmo Thomaz, Co-founder, Co-CEO & Co-Chairman at VTEX]

We look forward to sharing more progress with you in the coming quarters. Thank you for joining us today. Have a great day.

Participants

Executives

• Julia Fernández, VP - IR
• Geraldo do Carmo Thomaz, Co-founder, Co-CEO & Co-Chairman
• Ricardo Camatta Sodré, CFO

Analysts

• Marcelo Peev Santos, Senior sell-side Equity Analyst - TMT & Education at JP Morgan Chase & Co
• Lucca Brendim, Equity Research Associate at Bank of America
• Maria Clara Infantozzi, Equity Research Associate at Itau BBA
• Gustavo Farias, Associate Director at UBS Group