VTEX

Good morning and welcome to the VTEC's reports first quarter 2022 financial results. My name is Brika and I'll be today's event specialist. There will be a question and answer session, and if you wish to ask a question, you may press star followed by one on your telephone keypad. Your host for today's call will be Julia Vota-Fernandez. So, Julia, please begin when you're ready.

Hello, everyone, and welcome to the VTEX Earnings Conference Call for the quarter ended March 31st, 2022. I'm Julia Batas-Hernandez, Investor Relations Director for VTEX. Our senior executives presenting today are Geraldo Thomas Jr., founder and co-CEO, and Ricarda Canata-Sodré, finance executive officer. Additionally, Mariana Gomide de Faria, founder and co-CEO, and Andres Polidoro, chief financial officer, will be available during today's Q&A session. I would like to remind you that management may make forward-looking statements relating to such matters as continued growth prospects for the company, industry trends, and product and technology initiatives. These statements are based on our currently available information and our current assumptions, expectations, and projections about future events. While we believe that our assumptions, expectations, and projections are reasonable in view of the currently available information, you are cautioned not to place on your reliance on these forward-looking statements. Certain risks and uncertainties are described on the risk factors and forward-looking statement sections of BTEX Form 20F for the year end of December 31, 2021, and other BTEX filings with the U.S. Securities and Exchange Commission, which are available on our Investor Relations website. Finally, I would like to remind you that during the course of this conference call, we might discuss some non-GAAP measures. A reconciliation of those measures to the nearest comparable GAAP measures can be found in our first quarter 2022 earnings press release available on our investor relations website. Now, let me turn the call over to Geraldo. Geraldo, the floor is yours.

Thank you, Julia. Welcome, everyone, and thanks for joining our first quarter 2022 earnings conference call. We started the year with a strong first quarter. Our business delivered solid growth with good execution across all regions, solidifying our position as the leader in the digital landscape in Latin America and strengthening our global footprint. I'm excited to update you on our progress in making VTAS the backbone of global commerce. In the first quarter, GMV has a robust performance as a consequence of healthier consumer sentiment in Latin America, as well as initial recovery of some verticals, such as electronics that were affected by inventory shortage in the second half of last year. Meanwhile, verticals such as apparel and accessories, beauty and healthy and groceries continued its high growth performance. all above 50% year-over-year growth in USD. As a consequence, GMV growth accelerated to 33.3% in U.S. dollars, resulting in 18.6 percentage points increases versus our fourth quarter GMV growth. Another highlight here is that Mexico's performance outpaced the region this quarter, showing strong indications of traction. We continue attracting premier brands and retailers. This quarter, we more than doubled in dollar amounts the goal lives of new stores in the Vitex platform, demonstrating that we're bringing into production the attractive backlog we mentioned during the second half of last year. Some new customers that went live this quarter that didn't have online store presence in the respective countries before were Boston Medical Group in Mexico, Xiaomi in Peru, Under Armour in Uruguay, Echo Water in Canada, and Colgate in Brazil. We also added customers that migrated from other competitive platforms, including Brigham Stratton in the U.S., Angeloni in Brazil, Moulinex and Arcor in Argentina, and Easy in Chile. Furthermore, during the quarter, we had a healthy sales momentum in new stores' contract signatures, which give us confidence in the sustainability of our business model. On top of strong momentum with new customers, we continue to build and transfer the sticking relationship with our existing customers. Some premier brands and retailers that expanded their operations with us by opening new online stores in new countries during the first quarter of the war. AB InBev added Mexico additionally to other eight countries in Latin America. H&M added Colombia, now totaling four countries in Latin America. Oyster, who was previously operating in six countries in Latin America, now added Argentina. Walmart in Central America, expanding their operations from five to seven countries in the region. And Whirlpool added France, India, Poland, and Singapore. currently operating with us across 15 countries across the globe. Additionally, in March of this year, Gartner published its Gartner Peer Insights Voice of the Customer Digital Commerce Report Review, where Vitex was named a strong performer. one of the things that we're most proud of in the report is that as of january 2022 96 percent of vtex customers reviewers are willing to recommend the text to others the highest score amongst our peers we believe this is a huge validation of our product and technology purely based on our customer feedback and give us the confidence to continue pushing forward towards our desired future. We know we cannot do all this alone. We believe in the multiplying force of collaboration. One of our key competitive advantages is our ecosystem, and that's why we will continue to nurture and expand our partners. Since our last earnings release, we have launched strategic partnerships with PayPal, eBanks, TikTok, as well as expanded our partnership with MercadoLibre. Our partnership with PayPal aims to strengthen our internationalization strategy and bring ZTEX customers close to excellent technological solutions for local and cross-border trade in the 38 countries where we operate. In line with our payment strategy, this partnership will contribute to the further monetization of our ecosystem. Subsequent to the first quarter of 2022, we launched the partnership with eBanks and TikTok. Our partnership with eBanks is also focused on cross-border payments collaboration in Latin America and to broaden cross-border payments for Brazilian e-commerce companies in Latin America. Through this union, Brazilian companies will be able to enjoy more than 100 payment methods in 15 countries across Latin America. With this partnership, we reinforce one of the pillars of the Vitex platform, which is to offer our customers new ways to grow their business through a complete solution. Similarly to PayPal, the eBanks partnership will be monetized with a rebate on the payment volume that flows through our platform. We also partnered with TikTok for business in order to offer an app that is available in the VTech App Store for all customers that integrate directly to TikTok, improving our customer's asset sharing process with the social media giant. We expect this to also help our customers to get better ad results as consumers will find more accurate products and avoid ads for sold-outs and out-of-stocks products. This app will help customers to use TikTok for business features on ZTEX Admin directly. Initially, it will be available for ZTEX customers in Brazil, and in the coming months, it will be expanded to other countries in Latin, Europe, Asia, and the U.S. We are happy to share that we have already early adopters that are anxious to test the app, such as Carrefour, L'Oréal, Reserva, and among many others. Last but not least, in addition to Brazil, we now have the certified integrations with MercadoLibre in Argentina, Chile, Colombia, and Peru. This is a significant milestone in our journey to become the center of a vast network that natively connects every part of the global digital commerce ecosystem. Before wrapping up, I'd like now to revisit our four product strategic priorities. This time, I'm going to focus our innovation update section on cases that our customers shared with the audience during the VTech Day. For context, VTEX Day is the largest digital commerce event in Latin America and the third largest in the world. Taking place in Sao Paulo, VTEX Day has had over 25,000 attendees during its two days. Starting with CNA, a multinational fashion retailer that besides fashion items also sells smartphones and accessories. Whenever a smartphone is out of stock in CNA's own warehouse, the VTEX platform enables a transparent connection to Samsung's inventory, which does the fulfillment and delivers it directly to the consumer. With this frictionless connection between the brand inventory, CNA significantly improves its conversion rate, and Samsung sells an additional smartphone. while both are also enhancing the end consumer experience. This is a clear demonstration of how CNA and Samsung are benefiting from our zero-friction onboarding and collaboration product pillar. Another interesting case is the one from Kobazi, one of the largest pet shops in Brazil. A pioneer in the megastore concept, focused especially on the care of pets and home and garden with more than 150 stores. During Vitex Day, Kobazi shared the benefits they witnessed after adopting multiple Vitex solutions. including seller portal, OMS, in-store, external and internal marketplace, shipping from store, live commerce, among others. That enables co-buyers to simplify processes and, more important, make sure that they offer a consistent experience to their customers across all channels. For instance, Since they adopted our shipping from store feature, they reduced the delivery time to two hours on 60% of their deliveries and increased the omni-channel penetration to 70% of total orders. In line with our vision to become the single control panel for every order, Kobazi highlighted the relevancy of having one source of truth for centralizing the multiple channels that commercialize the product. During VTEX Day, Whirlpool talked about the challenges of digitalizing as a huge brand manufacturer. Their digital transformation required structured changes, such as building an in-house technology team. Building this tech team enabled Whirlpool to build critical business solutions internally and on top of the VTEX platform. One of the outcomes of this partnership is the supply chain integration project, through which Whirlpool consolidates all product information in a single place with delivery time precision in all regions and distribution channels. This capability goes as far as enabling the manufacturer to sell a refrigerator currently located in a container in the middle of the sea. With this, Whirlpool achieved a positive impact on business indicators, such as an increase in consumer NPS by 16%. Along this line, Decaprio is also driving a unified commerce strategy and transforming the role of brick-and-mortar stores with its detoxing store. During the test day, Decathlon stated that the convergence across sales channels is the foundation for a successful customer experience. The sporting goods chain backed on the implementation of our endless I.O. and fulfillment modules in all its stores. With the endless IO capability, the store sales rep has access to all e-commerce available inventory and even other stores, enabling the sales rep to place the order and not lose the opportunity with the consumer. For companies with a large catalog, such as Decathlon, which has over 15,000 SKUs, the solution increases the chances of conversion by expanding the inventory and catalog assortment using both warehouses and physical stores. Leveraging the tech capabilities, Decathlon shared that the endless IO orders placed in-store currently represent 5% of total brick-and-mortar sales. Decathlon is now able to run the full customer journey in a single place, aligned with our single control panel for every order product pillar. Additionally, During VTech Day, Samsung shared its live shopping adoption journey. As a highlight, they had a live shopping event in Mexico this quarter where they launched a new Galaxy S22 5G. In the event, they sold more than $1 million in GMV, engaging almost 12,000 viewers in only 54 minutes. This Samsung use case is another demonstration of our vision of VTech becoming the single control planner for every order. Looking at our live shopping app adoption throughout VTech's customer base. During the first quarter of 2022, we had more than 130 live shopping events with a positive trend month over month. We started the year with 24 events in January 22 and ended the quarter with 61 events in March 22. Along with Samsung, companies like Nestle, Senconsuit, Coca-Cola, Grupo Exito, Fravega, among many others, have already adopted the solution. Additionally, and subsequent to the first quarter of 2022, on April 25th, We had our first live shopping event in the U.S. with Motorola. We're now offering live shopping across 14 countries with over 150 active accounts. Michael Kors shared their experience with the adoption of our new VTech Shipping Network feature. The new functionality acts as a broker of shipping services choosing the most efficient partner for each route and product delivery. Michael Kors not only shared their experience in terms of improvements in delivering times and SLAs, but also focused on the efficiencies they've been able to reach with around 10% shipping cost savings and the traceability of the deliveries. This use case from Michael Kors is a demonstration of how we are delivering commerce on autopilot and co-pilot to our customers to help them succeed in their digital transformation. Looking at our logistics market opportunity more broadly, according to industry sources, shipping costs represent around 10% of our customers' revenue. Early adopters of the VTEX shipping network are experiencing significant shipping cost savings, aligned with Michael Kors' case, leading to a low single-digit percentage point increase in their digital commerce operating income. All the developing platforms of choice for digital commerce were proud to announce that we continue attracting developers to our local platforms. gaining momentum in the community and scaling our capabilities. Monthly active developers assessing the Vitek's development portal increased to more than 24,000 in the first quarter of 2022, from more than 20,000 in the first quarter of 2021. Wrapping up our operational update section, I would like to thank our 1,765 detectives that have worked and continue working efficiently to fulfill our mission, as well as our customers, partners, and investors. Now, I will turn the call to Ricardo, so he can cover our financial progress report for the quarter. Thank you, Geraldo.