VTEX

I would like to remind you that management may make forward-looking statements related to such matters as contained 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 for 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. and uncertainties are described on the risk factors and forward-looking statement sections of VTEX Form 20-F for the year end of December 31, 2023, and other VTEX 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-GAAP measures. A reconciliation of those measures to the nearest comparable GAAP measures can be found in our third quarter, 2004, or is personally 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 thank you for joining our third quarter 2024 EARNEST conference call. We are proud to report that our product innovation and expanded platform capabilities continue to be key drivers of growth, further strengthening our competitive modes. For our complete and composable approach, We are deepening relationships with existing customers while also attracting high-profile brands and retailers, driving both top-line growth and profitability. VTech made strong strides towards profitable growth. During a period of macro uncertainty, we continue delivering strong subscription revenue growth while also optimizing our cost basis. resulting in a gross profit growth of 28% in FX neutral this quarter. Significant progress is also noticeable on a Rule of 40 basis, with VTEX achieving 32% this quarter, up from 28% in the same period last year. we may be slightly more than a handful of quarter away from reaching the 40% target presenting on our investor day last year. Finally, as macro uncertainty may begin to clear, we have streamlined VTech to fully capitalize on the attractive market opportunities ahead. We're proud to serve some of the most influential brands and retailers, fostering trusted relationships and supporting their success, which ultimately pushes us toward our vision to become the backbone for connected commerce. On top of our existing customers' robust performance, adding new customers further strengthens our growth engine. New contract signatures have remained robust. This quarter, we're excited to highlight the successful go-live of Fast Shop in Brazil, one of the big accounts we were implementing throughout the year. The solid sales momentum in our most mature market, compounded by the progress in the U.S. and Europe, and the newer products such as B2B offering and VTech ad network, give us confidence in our long-term profitable growth potential. On Q3 2024, beyond FastShop's Gold Live in Brazil, we've expanded our customer base with new wins, including Beko in Austria, Bemol Champion Relogios, Ferramentas Negrão, FQM Consumo, Gramomania, and George B. Scott, in Brazil, Confama and Rimax in Colombia, Carida and Farmacia Universal in Peru, and U.S. Electrical Services in the U.S. Our existing customers are also deepening their partnership with Vitex. Colgate launched a new store in Switzerland, expanding its footprint across Switzerland, Brazil, and the U.S. First, added two new stores, Harper Bazaar and Prevention, bringing their store count to five across the U.S. Camel Hair Cosmetic launched a new store in the U.K., now serving the U.K., Belgium, France, and the Netherlands. Mazda expanded into Belgium, now operating three countries across Europe, and Samsung added two new stores in Uruguay, now operating in three countries in Latin America. We're grateful for the trust of our customers, whom we look forward to serving with excellence. The decision to entrust Vitex reflects the value of our product and the deep relationship we forge as we collaboratively shape the future of commerce. And talking about collaboratively shaping the future of commerce, this year we hosted several key events to strengthen our brand presence across various geographies, including the U.S., Brazil, and Barcelona. This quarter was the turn of a high-potential market for us, Mexico. The TexConnect Latam, which has become a flagship event for digital commerce in the region, with over 10,000 registered participants in Mexico City. The event featured pro-eminent players such as Amazon, Decathlon, Grupo Coppel, ATB, L'Oréal, Mondelez, TikTok, and many others, with Apple co-founder Steve Bozniak redlining as the keynote speaker. Like our other events this year, Vitex Connect LATAM was instrumental in boosting brand awareness and recognition, driving lead generation and potential future conversion in our sales funnel. This quarter, we also launched Vitex Vision Forwardition, an initiative designed to align our product roadmap with customer needs and showcase the robustness of our platform to prospects. Reinforcing our position as the leading composable and complete commerce platform, let's highlight some of the key announcements. On the retail media side, in this edition, we expanded the Vitek's ad network media kit portfolio with new ad formats. Sponsored products now appear in search, how to complete suggestions and product galleries, boosting visibility and customer engagement with a seamless experience. We'd also simplify the process of advertisers to measure and visualize campaign performance, offering deeper insights and facilitating data-driven decisions. Advertisers can now easily export campaign data, search terms, and product insights, providing comprehensive reports with just a few clicks. Additionally, we announced upcoming features such as ads with product recommendation powered by Cinerise and Sponsored Banners targeting shoppers at the discovery phase. The VTech ad network already counts with leading publishers such as Fast Shop, Drogaria Pacheco São Paulo, and Zona Su, among others. We've also introduced new data models for catalog, promotion, and external marketplace data to the VTEX data pipeline. The product is now compatible with any preferred data warehouse, BI tools, and CRM systems, making it easier than ever to deliver VTEX commerce data where it's needed most. These new models offer a unified view of commerce operations, allowing businesses to optimize their strategies seamlessly. These are just a few of the exciting updates in the VTEX Vision 4 edition. I encourage everyone to visit our website at vision.vtex.com for the complete list of the releases, enhancements, and product innovations. In the third quarter of 2024, we also expanded our platform post-purchase capabilities with the acquisition of Wemi, a leader in AI-powered customer service solutions. Although a small financial investment, this strategic acquisition significantly enhances VTech's ability to offer a comprehensive end-to-end customer experience platform tailored to the personalized needs of today's consumers. The tech's customers will now benefit from AI-driven, intuitive customer support options that boost efficiency and drive sustainable business success through a more connected and seamless commerce journey. When its AI capabilities allow us to deliver modern software, Through AI, we will deliver measurable business outcomes of increased customer engagement and satisfaction while optimizing outdated and inefficient call center operations. Finally, this acquisition aligns perfectly with our vision to be the backbone for connected commerce, shaping the future of digital commerce by empowering brands and retailers to deliver. personalized omni-channel experience at every touchpoint. Now turning to the heart of our company, our customers, I'd like to share some success stories. Bemol, one of the Brazil's largest retailers with 39 stores, 48 pharmacies, and five distribution centers, successfully migrated its entire operation to VTEX, including its B2C franchise model, and had this app, picking a scalable, efficient platform to unified operations, streamline sales, and introduce innovative financial solutions like the more store credit, the more value bonus, credit to the mall, and the more picks. During the phased rollout, the website already experienced a 12% boost in conversion rate. and a 33% increase in average revenue per session. After fully migrating all traffic to VTEX, organic traffic rose by 8%, supported by a 56% faster loading performance in mobile device with limited processing power and internet connectivity. These advancements not only improve the user experience, but also reinforced Permol's expansions across Brazil. With Vitex, Permol is now positioned to further growth, capitalizing on its scalable architecture and strong financial integrations to provide a superior omnichannel experience. Colgate-Palmolive, the global leader in oral skin and pet care, continued its expansion with Vitex. Following the successful B2B implementations of PCA Skin Professional and Colgate Oral Professional in the U.S., Colgate has now expanded its digital strategy to international markets, recently launching Oral Professional in Switzerland and its European B2B site on Vitex. Colgate's headless global architecture powered by Vitex enable a seamless rollout, demonstrating the platform adaptability and scalability across diverse markets and business models. We're thrilled to support Colgate's continued expansion in the U.S. and Europe, underscoring their commitment to digital commerce innovation. Decathlon, a global leader in sporting goods retailers with over seven 1,500 stores across 64 countries. Leverage VTech sales app in Brazil to enhance omnichannel strategy and create a seamless shopping experience across both physical and digital stores. By integrating their sales channels, Decathlon allow customers to purchase items not in local stocks by accessing a unified inventory across all stores. The VTech sales Sales app enables personalized customer interactions, real-time stock visibility, and flexible checkout, ensuring a faster, more agile shopping experience. This innovation has helped Decathlon maintain its commitment to delivering high-quality, customer-centric service, driving operational efficiency, and increasing conversion rates to a fully unified commerce platform. FastShop, the leading Brazilian retailer with 36 years of history, 85 stores and 15 distribution centers, selected VTACS to migrate from its legacy platform due to high cost and lack of flexibility. FastShop has now significantly lowered its total cost of ownership and gained access to our robust and deep ecosystem of third-party solutions. enhancing its customer experience, and happily expanding into new channels like B2B. All operations, including physical stores, online storefronts, marketplace, and B2B, will now be integrated into a single unified platform. They've also developed a custom app for in-store sales team, delivering personalizing shopping experience. This strategic shift strengthens FastShop's premium customer journey, offering a seamless omnichannel experience with exclusive service and a strong loyalty program, FastPrime. We are thrilled to see immediate improvements in site performance and sales conversions and look forward to supporting them with agility and flexibility in all future developments. Hearst, one of the largest global diversified information and media companies, has leveraged VTech's extensive native capabilities, multi-site architecture, and VTech's IO developer cloud to successfully integrate with the prestige beauty retailer Sephora, becoming part of Hearst's expanding digital marketplace. Now available across leading lifestyle publications like Women's Health, Cosmopolitan, Harper's Bazaar, Men's Health, and Prevention, Hearst's integration with Sephora marks a new era transforming the buying experience for consumer media business. Readers can now seamlessly purchase products that are mentioned or featured in published content from their favorite national magazine and websites, making every touchpoint a sales opportunity. Women's Health, a trusted publication contributing to the wellbeing of women everywhere, has expanded its reach by instantly enabling readers to become customers. Now, with just a click, over 8,500 products with Sephora's diverse assortment are available, offering customization and rewards through its popular Beauty Insider loyalty program. We're excited to accompany hearts in this journey that marks a major advancement for the media industry. delivering a seamless experience with shoppable interfaces for effortless product discovery and purchase. Closing this session, I would like to extend my sincere gratitude to the 1,409 VTEXers. It takes a collective effort, and together we're reshaping the future, establishing VTEX as the backbone for connected commerce. We have ambitious goal and united. We will seize every opportunity. I will now hand the call over to Ricardo.

Thank you, Geraldo. Hi, everyone. I'm pleased to share VTAC's Q3 2024 financial results. This quarter, our GMB reached $4.4 billion, marking a year-over-year growth of 10% in U.S. dollars and 17% in FX neutral, with same-store sales remaining in the teens' range. Our revenue stood at $56.0 million, representing a year-over-year increase of 11% in U.S. dollars and 19% on an FX-neutral basis. Subscription revenue reached $53.9 million, representing an increase of 13% in U.S. dollars and 22% in FX-neutral, primarily driven by good momentum in new contract signatures, solid performance from existing customers, and cross-selling of add-on services. Services revenue total $2.1 million, a by-design reduction given that the evolution of our ecosystem has allowed our new customers in the U.S. and Europe to rely less on direct services from VTEX, which in many cases were sold at a loss to onboard our initial larger customers in these regions. Now, going to our costs and expenses. Our non-GAAP gross margin reached 75%. up from 71% in the same quarter last year. The approximately 410 basis points year-over-year improvement was mainly driven by costing cost efficiencies, resulting in our non-GAAP subscription gross margin increasing 230 basis points, reaching 79% in Q3 2024 from 76% in the same quarter last year. While work remains to fully reach our investor day subscription gross margin target model goal, future improvements may be more marginal. Moving down the P&L, this quarter we achieved a positive 14% non-GAAP operating income margin, marking a 10 percentage point improvement year over year. Our non-GAAP total operating expenses were $34.2 million, slightly up from $34.1 million in the same quarter last year. As mentioned earlier, most of this margin expansion is driven by revenue growth, supported by a well-invested and efficient organizational structure, which will allow us to invest in R&D and sales and marketing to fully capitalize on market opportunities that may emerge. Combining our operating income results with disciplined working capital management resulted in our free cash flow in Q3 2024 reaching $7.7 million. representing a 14% margin and up from 5% margin in the same quarter last year. We are well positioned to continue delivering strong cash conversion and will remain focused on pursuing the most suitable high return opportunities for the long term. Notably, given our strong free cash flow, we managed to increase our cash and short-term investment position to $217 million. even after allocating capital in some inorganic opportunities. Looking ahead, we remain encouraged by our sales momentum and operational leverage. As macro uncertainty may begin to clear, we have streamlined VTEX to fully capitalize on current market opportunities. We reaffirm our commitment to delivering profitable growth by continuously focusing on maximizing revenue and long-term value. We will continue to evaluate our investment levels in alignment with demand, sales conversion rates, and return on investments with the rule of 40 as our north star. Moving on to guidance, from a revenue perspective, given the tougher comps in Q4 that will ease up in Q1, we are targeting FX-neutral year-over-year revenue growth of 14% to 17% for the fourth quarter of 2024. implying a $64.8 million to $66.8 million range. For the full year 2024, as we continue executing our profitable growth strategy, we are targeting FX neutral year-over-year revenue growth of 18.5% to 19.5%, implying a range of $230 million to $232 million. based on Q3's average FX rate. We are raising our non-GAAP operating income and free cash flow margin target to low teams. In conclusion, VTEX holds significant growth potential, supported by our progress toward profitable growth. We are seeing a strong sales momentum with new customers, geographical and brand expansion from existing customers, and improved operational efficiency. positioning us to seize future opportunities. We remain optimistic about Brazil's potential, the vast opportunities in Latin America, and the large and attractive markets in the US and Europe. We will continue pursuing disciplined growth, making firm steps toward our ambition to become the global backbone for connected commerce. With that, let's open it up for questions now. Thank you.