VTEX

Thank you for standing by. My name is Vandeep and I'll be your operator today. At this time, I'd like to welcome everyone to the VTEX Report Second Quarter 2024 Financial Results. All lines being placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star followed by the number one in your telephone keypad. If you'd like to withdraw your question, press star one again. Thank you. I would now like to turn the call over to Julia Bater Fernandez, investor relations director. You may begin.

Hello, everyone, and welcome to the VTEX earnings conference call for the quarter end of June 30, 2024. I am Julia Bater Fernandez, investor relations director for VTEX. Our senior executives presenting today are Geraldo Thomas Jr., founder and co-CEO, and Ricardo Camata-Sodré, chief financial officer. Additionally, Mariano Gomira de Faria, founder and co-CEO, and Andres Polidoro, Chief Strategy Officer, will be available during today's training 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 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 current available information, you are cautioned not to place a new reliance on these forward-looking statements. Certain risks and uncertainties are described on the Risk Factors and Forward-Looking Statements section of BTEC Form 20-F for the year ended December 31, 2023, and other BTEC filings within 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-gap measures. A reconciliation of those measures to the nearest comparable gap measures can be found in our second quarter 2024 earnings press release available on our Investor Region website. Now, let me turn the call over to Geraldo. Geraldo, the floor is yours.

Thank you, Julia. Welcome, everyone, and thank you for joining our second quarter 2024 earnings conference call. The tax positioning is stronger than ever with a clear alignment between our value proposition and the needs of global enterprises. This is evidenced by our existing customers consistently outperforming the market and our sustained sales momentum. This allowed us to deliver another robust quarter and give us confidence in our future growth prospects. As a result, Our GMV grew by 19% and revenues increased by 22%, both in FX neutral, boosted by new contract signatures, cross-selling add-ons, and solid net revenue retention performance. Additionally, our ongoing subscription and service cost optimization has resulted in FX neutral year-over-year gross profit growth of 34%, We've made significant strides in developing a more efficient and resilient structure aimed at maximizing growth and capturing demand. Our team continues to enhance cloud efficiency while maintaining performance. As our ecosystem matures globally, our need to invest in services for new customers decreases leading to a significant increase in gross margin quarter over quarter, even after the strong results in Q1. A steady fast commitment to profitable growth has yielded significant year-over-year non-gap operating margin expansion in the last eight quarters, starting with 26 percentage points gained in the third quarter of 2022, picking at 42 percentage points in the second quarter of 2023 and reaching approximately 15 percentage points over the last three quarters. Following our remarkable journey, we still see room for operational leverage gains, although at a more moderate pace. Our cost optimization initiatives and discipline approach to expenses are reflected in our numbers positioning us well to reach the target model shared at our investor day. That said, let me now provide more insights into our operation and leaving Ricardo to cover the financials later. In the second quarter of 2024, we celebrated the successful go-live of new customers, such as Shoes in Australia, Armani, ColorMark, Drogal, and Pneu Barato in Brazil, the Lime Group in Chile, Ad Marketplace in Colombia, Grupo Nazan, and Librerias Gandhi in Mexico, Agea Seguro in Portugal, and MyEye Doctor in the US. Additionally, we continue our expansion with existing customers, adding more brands or new regions, such as Exiti, who added four brands in Colombia, now operating with 11 brands across five countries in Latam. Hearst, who added Cosmopolitan, now operating with three stores in the U.S. Multilaser in Brazil, who added a new brand. DJI, now operating with three stores in the country. Motorola, who added a store in Sweden, now operating across APAC, Canada, EMEA, Latam, and the U.S. Nike, who added a store in Uruguay, now operating in four countries across Latin, and Victoria Secrets, who added a store in El Salvador, now operating in 12 countries across Latin. The second quarter is always special for us because of VTech Day, an event that holds a unique place in our hearts. It allows participants to grasp the size of our ecosystem and gain deeper insights into our value proposition and new product. It also enables us to cross-sell features and attract new customers. While this time I will not delve into VTEX Day, I'm excited to share a new milestone. Following the success of our inaugural US event in the first quarter, we have now celebrated our first European event, VTEX Connect Europe, held in Barcelona, attracted over 3,000 registrants from more than 50 countries, featured over 60 sponsors, and delivered more than 10 hours of content, led by over 30 of Europe's most renowned e-commerce leaders. Panels included representatives from OBI, Mars, Red Cloud, Starbucks, Racket, among others. We are encouraged by the results of this event and our growth potential in the region. Another encouraging factor enhancing our global positioning is the recognition from industry analyst firms. 2024 has already been a remarkable year, with VTech being consistently recognized for its product strategy and vision. I am proud to announce that VTEX has been named the leader for the first time in the IDC market space, worldwide headless digital commerce applications for mid-market growth 2024 vendor assessment. We were acknowledged for providing comprehensive unified commerce solution, including B2B, B2C, B2X, omnichannel, experiential commerce and marketplaces, our native marketplace and OMS capabilities, developer-friendly tools and support, and a robust serverless development platform for rapid, scalable, and flexible e-commerce solutions. Combined with the recognitions received in the first quarter, We can now say Vitex is a leader in B2B, B2C, and headless digital commerce, according to ITC. We are encouraged by this recognition, which boosts our confidence in our global expansion journey and affirms that we are on the right path. In a world where the value of building connections is exponential, we are committed to evolving and strengthening our network of partners and channels, ensuring we stay ahead of our customers' dynamic needs and unlock new go-to-market strategy for them. With this in mind, in the first half of the year, we've expanded our partnership with TikTok, which has grown from Brazil to the rest of Latin. And this quarter, we're thrilled to launch a partnership with Pinterest, further expanding our customer social commerce opportunity. Through this collaboration, our global customers can seamlessly integrate their product catalog, create pins, execute high-performance shopping campaigns on Pinterest, reaching over 500 million monthly active users. This partnership advances our missions to empower global enterprise brands to deliver seamless shopping experiences and engage with consumers seeking inspiration in a positive online shopping environment. We're thrilled to see customers such as Whirlpool, Blindstand, and Easy already leveraging Pinterest catalog to enhance their customer journey from inspiration to action. Security remains a priority as we grow our network and widen our geographical footprint. In a world where data is as valuable as gold, security will only grow in importance, especially as government enforce regulations and set mandatory security standards for providers. That said, we proudly announce that VTEC has achieved the ISO 27001 certification, which provides an international standard framework and guidelines for establishing, implementing, and managing an information security management system. This certification represents another step in our security journey. and highly reaffirms our commitment to supporting and providing peace of mind to our customers. Before moving to the financial section, I would like to share some customers' case with you to illustrate more tangibly why enterprises worldwide are choosing Vitex and how we are partnering with them to streamline their operations. Adi, by now, payment method provided in Colombia decided to expand its business, becoming a marketplace with the Vitex platform. This strategic move aimed to connect its existing merchants, most of whom were Vitex customers, and enabled them to use Adis payment methods via a mobile app. The new platform has over a million customers and is built using our robust marketplace architecture with both VTEX and non-VTEX sellers integrated through the seller portal. The project was also developed using our authentication protocol integrated with a third-party identity provider, VTEX IO store framework, and analytics integration with Amplitude. Additionally, the ad payment connector is certified through the payment protocol. The implementation, completed in less than four months, delivered impressive results in the first three months of operations, enhancing ADI's market presence and driving significant growth. Choose an Australian NDIS-approved disability equipment and supplies distributor dedicated to supporting individuals with disabilities and aging Australians has launched its marketplace partnered with VTechs. Choose is leveraging VTechs out-of-the-box features such as marketplaces, seller portal, OMS, and VTechs.io to facilitate its digital business expansion. With a growing network of 134 sellers and a catalog of over 18,000 products, The marketplace architecture empowers customers with seamless product comparisons and the ability to purchase from multiple local sellers simultaneously. By leveraging the Vitex IO iPass solution, choose successfully implemented, customized, and NDIS-friendly invoicing for purchases from multiple shops. including all necessary data for claiming, simplifying the claiming process, and reducing the likelihood of delays and rejections. Additionally, a feature to include membership and subscription services for key products is under implementation. CHOOSE aims to set a new benchmark in disability and aged care shopping focusing on expanding its product range and diversity on the platform to attract more customers and boost revenue. We are excited to partner with Choose on their journey to becoming leaders in the sector, helping them to leverage their expertise by providing a seamless, transparent, and accessible shopping experience to their customers. Cosmo Music, a leader in musical instruments rental in Canada, recently completed the migration of the rental business from a highly customized legacy platform to VTEX. This strategic move was driven by the need to enhance operational efficiency, streamline the checkout process, and provide greater control over rental contracts. The migration to VTEX has ensured the seamless and uninterrupted customer journey, maintaining service consistency. Following the migration, Cosmo Rentals has achieved a stable number of rental orders year over year and outstanding outcome during the transition period. The migration included implementing advanced features such as a seamless one-page checkout enhanced rental management capabilities, and intuitive interfaces for managing business rules and customers' journeys. These improvements have enabled Cosmo Music to better serve its diverse customer base, including students, parents, educators, and organizations, while laying a solid foundation for future growth and adaptability. Additionally, and aligned with our firm commitment to our customers, Cosmos Rentals was highlighted that VTAC's professional services team has been unparalleled partners throughout the process, early understanding their business, meticulously mapping out complex business rules and various customer journeys, and ensuring the project was managed to guarantee its success. Dior. The renowned French luxury fashion and beauty brand has an exceptional success story in Chile and served as a compelling testament to the transformative power of Vitek's omnichannel capabilities. By partnering with Vitek, Dior experienced more than 100% year-over-year orders spike in the first half of 2024. directly attributed to the seamless integration of the physical and online channels. Leveraging VTech's expertise and adaptable solutions, PR effectively navigated the complexity of digital transformation and successfully expanded to Argentina with plans to broaden the reach to new markets across Latin America. The collaboration with Vitex empowered Dior to deliver a unified commerce experience, ensuring consistency and excellence across all touchpoints, whether online or offline. Dotto, a marketplace for electronic devices, has expanded its reach through its integration with the Vitex platform and ecosystem in Mexico, enhancing usability and user experience. Dotto can now effectively measure and improve its conversion rates by leveraging key VTech components, such as A-B testing and workspaces. Its innovative double-by-box, offering save time and save money delivery options, has increased user interaction and loyalty, resulting in a 19% boost in product conversions. With Vitex I.O., Dotto can manage its infrastructure natively, focusing on user experience, leading to a 27% increase in site visibility and a 26% rise in visits from returning users. Additionally, Dotto benefits from Vitex's omnichannel strategy, adopting the Vitex Sales app, and more recently, Vitex Intelligent Search. These advancements have established Dotto as a leader in e-commerce, ensuring a balance between logistical efficiency and customer satisfaction. AGS Seguro, the largest insurance provider in Belgium and a leader in 14 other countries, has launched a new health and wellness marketplace in Portugal. under their Magis brand, partnering with Vitex. They chose us for our unique native marketplace capability and robust front-end features, including the store framework and the optimized checkout flow. These were crucial for integrating multiple payment protocols, including its own payment methods and various gift card options. Additionally, By using the VTech seller portal, AGEA Seguros Portugal can now efficiently onboard sellers, ensuring a quick and straightforward process. We are excited about this partnership and eager to help them create an innovative healthcare ecosystem. H-Mart, the largest Asian supermarket chain in the U.S., migrated to VTech launching two new online stores after a seven-month transition from the legacy platform. By migrating, HMarts sought to consolidate the previously separate systems for perishable and non-perishable items with its fresh goods systems, creating a unified commerce experience. Now, consumers are able to order from all product categories in the same cart, and while also leveraging store inventory to provide real-time availability information and facilitate efficient delivery strategies. In the second quarter, HMART initiated the integration process for its physical grocery stores, beginning with the California locations. HMART's e-commerce capabilities have already witnessed significant enhancements incorporating features such as VTech's Pick and Pack app for seamless in-store order picking and precise product visibility control based on customer location for franchise accounts and trade policies functionality. On top of that, the architecture also integrates with HMART's ERP for category inventory and pricing, tax automation, and payment processing. With over 90 locations across the U.S., this strategic move positions HMART to deliver a superior omnichannel shopping experience, both online and offline. We're excited to accompany HMART on their digital transformation and their path to strengthening its market share in the U.S. Liberia Grande, a leading bookstore chain in Mexico with 49 physical stores and a central distribution center, partnered with VTACS to enhance their omnichannel capabilities. They aim to integrate their extensive inventory of 4.5 million SKUs, including physical and digital products, across all sales channels. This integration enabled sales and inventory management from each store and incorporated in-store pickup. Leveraging Vitek's architecture, Gandhi could offer same-day delivery in Mexico City, prioritizing distribution and delivery from the central distribution center, and extended their sales reach through marketplace integrations with Walmart Mexico and Mercado Libre. Additionally, we're developing the sales integrations with Palacio de Hierro, Mexico's premier luxury department stores, and building the capabilities to manage international deliveries from their central distribution center. Last but not least, PagMenos, a leading pharmacy retail chain in Brazil, recognizes the pivotal role of retail media as the next frontier in advertising. By using VTech's ads network, PagManus efficiently manages its advertising space, seamlessly aligning advertiser promotions with consumer behavior to drive sales, all without the burden of managing numerous separate advertisers' relationships. This integration expanded the reach, opened new sales channels, and delivered immediate increase in sales and revenue, while on the other hand, it boosted advertiser performance metrics and ROAs. With the Tax Ads Network scalable and performance-driven approach, PagMenos is poised to capitalize on emerging trends and drive further growth in the future. To finalize this session, I'd like to express my gratitude to our 1,339 dedicated VTEX employees whose commitment, passion, and execution do not go unnoticed. I also want to thank you, customers, partners, and investors who support us on this journey and help shape our story. We have a clear vision and a challenging yet rewarding purpose to become the backbone of connected commerce. Let's make it happen. Now, I will hand the call over to Ricardo.