VTEX

Faria, founder and co-CEO, and Andres Polidoro, Chief Strategy Officer, will be available during today's Q&A session. I would like to remind you that management may make forward-looking statements related to such matters as continued growth prospects for the company, industry trends, and product and technology initiatives. 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 undue reliance on these forward-looking statements. Certain risks and uncertainties are described in the risk factors and forward-looking statement sections of VTEX Form 20F for the year-end of December 31, 2024, and other VTEX filings within the U.S. Security and Exchange Commission, which are available on our industry-related websites. 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 fourth quarter 2004 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 fourth quarter 2024 earnings conference call we closed the year with our underlying business remaining stronger than ever looking at the medium to long term 2024 was a transformative year for the tax we delivered significant milestones in our evolution as a global leader in digital commerce first we continue to see a robust sales momentum in signing new enterprise customers onto the Vitex platform, demonstrated by the number of customers that pay us more than $250,000 per year, increasing from 126 to 155. Second, our annual revenue churn remains stable in the mid-single-digit percentage range, an evidence of our customer satisfaction and our strong position in the competitive landscape. Third, we introduced new products such as VTechAd, Data Pipeline, and Shield, designed to empower our customers with AI-supported add-ons that enhance business outcomes and revenue generation. delivering efficiency and tangible business results for our customers and potentially contributing to VTech's monetization capabilities. The three operational pillars highlighted above, adding new enterprise customers, maintaining low churn, and launching innovative products, are key to VTech's medium and long-term success. While our revenue model with two-thirds coming from a take rate on customer GMV, closely align our success with that of our customers and benefit us from the growth of digital commerce. It also introduces short-term volatility. This was evident this quarter and year, with revenue coming below expectations due to weaker sensor sales. particularly in Brazil, amidst softer consumer spending and significant effects of devaluation. Ricardo will elaborate further on this in the financial section. Now, going back to the three key operational growth drivers. On adding new enterprise customers, in 2024, we saw strong contract signature momentum, with Brazil standing out as a highlight throughout the year and with notable contributions from U.S. and Europe in the second half. As a result, our deferred revenue increased 29% year-over-year, which is a testament to the attractiveness of our value proposition for net new customers, an existing one that renewal after renewal keeps choosing VTEX. These achievements reaffirm VTEX's global ambitions of becoming the backbone for connected commerce. be more than just a software provider, but the preferred comprehensive commerce suite by the bold CIOs and CEOs worldwide. On keeping a low and stable churn, we further solidified our partnership with top tier brands and retailers, demonstrating our ongoing upmark trajectory with a 23% increase in number of customers generating over $250,000 in annual recurring revenue. In 2024, we celebrated the go-live of several key customers, including H Mart, MyEyeDoctor, Jeffers Pat, and Hearst's ongoing expansion in the U.S., OBI, and an enterprise multinational fashion retailer in Europe, Motorola in Sweden, and Whirlpool in Poland. Pashmina in India, Nike, Adidas, and Electra across Latin America, and Fast Shop, Hortifruit, and Bemol in Brazil, among many others. Although our total number of customers has slightly decreased year over year, that's driven by a lower intake of small customers that are not strategic nor financially relevant for VTech. Our annual revenue churn remains stable in the mid-single digits, as our base of customers paying us more than $250,000 in ARR grows and compounds over time. It further strengthens VTech's long-term growth and resilience. On launching product innovations. VTech is successfully transitioning from a single product platform into an integrated suite of solutions. Our offering now spans B2C, B2B, sales app, pick and pack, data pipeline, retail media, security shield, and many more, empowering business through a well-connected ecosystem. Our strategic investments, including a stake in Cinerise and the acquisition of Wenny, expanded our AI and conversational commerce capabilities, while enabling us to enter two new segments, retail media and post-sales markets. This diversification strengthens our position as the most comprehensive suite of commerce solutions, going beyond software to serve as a trusted ally in executing our customers' growth strategies. As we look ahead, we remain steadfast in building trust with our customers and delivering on our promises alongside our ecosystem partners. Trust is at the core of eTech's DNA and will continue to guide us as we solidify our leadership in digital commerce. With this segue, let me go to the newly added customers during the fourth quarter of 2024, including Dakota Criações, Dona Carioca, Hortifruti, Hortobon, and Hisu in Brazil. Torre in Chile, an enterprise multinational fashion retailer in Ireland. CoolBox, Hanes in Mexico. Sameca in Portugal. Heart Corporation and Lion Bakery in the U.S. We've also focused on strengthening our relationship with existing customers, actively supporting the GROW initiatives. During the fourth quarter, several premier brands and retailers chose Vitex to expand their operations with us, including Amo Beleza, has launched a new brand, Mascavo, and now operates two B2C stores in Brazil. Cartamundi has introduced the Green Mouth brand in France, extending its operation to Europe, in addition to its two B2C stores in the U.S. Kirne continues to expand its B2B presence across Europe, adding Germany to its Belgium, France, Netherlands, and U.K. operations. Mazda is further strengthening its European presence with the addition of France, which is now operating in four countries. Sola has expanded to B2B in Colombia with two new accounts, Sola B2B and Distraves B2B, adding their two existing B2C stores in the country. And Voit has expanded its B2C presence into the U.S. complementing its operation in Mexico. Additionally, in our continued pursuit of fostering our trusted ecosystem, we're thrilled to announce that we've launched a strategic partnership with Accenture to Logic, the retail technology systems integrator. This collaboration empowers U.S. enterprises to modernize this digital commerce infrastructure. addressing shifting buyer trends and rising market challenges. With record retail closures, right lighting the urgency for transformation, VTech and Accenture are united to help brands stay competitive by leveraging VTech's Agile platform and Accenture's expertise in business transformation. This partnership positions VTEX at the forefront of driving growth and resilience for US companies in today's dynamic retail landscape. Now, before leaving the stage to Ricardo, I would like to share some customer success cases demonstrating our platform's tangible impact and potential. An enterprise multinational fashion retailer in Ireland partnered with Vitex to overcome significant technical and operational challenges. Before Vitex, the company relied on a dedicated e-commerce textile platform that lacked scalability, functionality, and the flexibility needed to support its growing digital commerce ambitions. Their primary objectives were integrating inventory from over 100 stores centralizing digital sales and driving revenue and efficiency improvements. VTech implemented its core platform with a white label B2C operation to address this need and enhanced the user experience with out-of-the-box features like color and sizing options. The architecture was further strengthened by redesigned front-end and integrations facilitated by middleware from our partner, Logic. Early indications suggest improved sales efficiency and platform usability by integrating a smart checkout. Carajás, the leader retailer in home improvement segment in Brazil, transformed its customer experience and boosted sales with Wany by Vitex. With 11 physical stores, two distribution centers, and over 20,000 SKUs ranging from decoration to construction products, Carajás needed an efficient post-sales channel to enhance customer service and drive incremental revenue. By integrating conversational commerce with money by Vitex, Carajás automated key processes, including car recovery with optional human assistance, order updates and financial solutions like invoice retrieval and PIX payments. This automation led to remarkable results, such as a 15 times higher conversion rate on WhatsApp than email, an expansion on the return of an investment in abundant card recovery, which reached double digits, and a 68% message read rate. well above the 40 to 45 average for emails. We are proud to help Karajá embark in their conversational commerce journey, where WhatsApp has already become a comprehensive and efficient channel, delivering trust, convenience, and competitive differentiation throughout the customer journey. Heineken Brazil, home of some of the most beloved alcoholic beverage brands chose Vitex Ads to run their digital campaigns. It achieved exceptional results with above average return on ad spend in the fourth quarter of 2024. This success was powered by identifying Zona Su highly qualified audience through first-party data, including transactional insights and search behavior on the platform. By analyzing shopper intent, Heineken campaigns were strategically optimized, targeting consumers with high purchase intent and ensuring maximum impact across many SKUs. Through this data-driven approach, Vitex Ads provides Heineken Brazil with actionable insights into key performance indicators like sell-out, and market share, helping them define the strategy for even better results. Pashimina.com, the leading B2C e-commerce platform specialized in luxury handcrafted cashmere pashiminas, has partnered with Vitex to transform its digital operations and accelerate global growth. With 85% of its business coming from international export, Pashmina.com migrated from its legacy platform to VTech's platform to enhance scalability, flexibility, and operational efficiency. This transition empowered the brand to offer personalized shopping experiences, multilingual support, and local currency option for its customers across the US, Europe, Australia, and India. This partnership allows Pashumina.com to expand its global presence while celebrating the rich heritage of Kashmir craftsmanship, all without the burden of managing its web infrastructure. Together, we aim to redefine India's digital retail landscape and set new benchmarks in global e-commerce innovation. Sony. The Hinoen Global Electronic Company has selected SalesApp as the primary platform to manage sales operations across Latin stores. These partnerships represent the first multi-country implementation of the SalesApp, with seven stores across Ecuador and Chile already becoming their main in-store sales platform. To meet its specific operational needs, Sony has extended Sales App within the Vitex ecosystem using Jitterbit, integrating it with their existing systems. Sony plans to expand Sales App usage for four additional countries in Latin, Peru, Panama, Colombia, and Mexico, bringing the total number of stores to 18, with Sales App as its exclusive platform for all operations, this rollout underscores its potential to drive significant results across Sony's regional network. Walmart, the multinational discount store operator and one of the largest corporations in the global retail industry, is transforming the mobile shopping experience across Central America by launching new apps in Costa Rica and Guatemala. The apps offer a flexible, customized shopping solution for each country and store formats from Walmart super centers to supermarkets and discount stores. Leveraging VTech's IO infrastructure and our API-first approach, The app's advanced architecture enhances load time and performance, while intuitive navigation improves user experience, driving higher customer satisfaction. This is just the beginning with the additional brands across the region set to go live. Through its digital expansion, Walmart is setting new standards for retail innovation in Central America, a development we proudly support. The Smart Storage Solutions business unit of Black & Decker successfully launched its Smart Storage Digital Commerce Store, migrating from content-only Sitecore website to the Vitex Fast Store platform. This new platform delivers a seamless catalog browsing and purchasing experience for prominent brands like Vidmar, Lista, and Cridmaster. Built on the proven global architecture used for Stanley Engineering fastening website, also powered by Vitex, smart storage expands in Stanley assortment availability and commerce capabilities, positioning to meet the rising demand of digitally native B2B customers. The migration represents a pivotal step and enhancing operational efficiency and customer engagement in B2B digital commerce. To conclude this session, I want to express my gratitude to our 1,368 VTEX employees dedicated to making VTEX the backbone for connected commerce and to our customers, partners, and investors. With that, I will now hand over the call to Ricardo to discuss our financial performance for the quarter and the full year of 2024.

Thank you, Geraldo. Hi, everyone. It's a pleasure to update you on our financial performance. In the fourth quarter of 2024, our GMV reached $5.4 billion, representing a flat year-over-year growth in U.S. dollars and 11% increase in FX neutral. With this, we concluded the full year 2024, reaching $18.2 billion in GMV, representing 10% and 16% growth in U.S. dollars and FX neutral, respectively. Our revenue total, $61.5 million, growing year-over-year 1% in U.S. dollars and 12% in FX neutral in the fourth quarter of 2024, and reached $226.7 million for the full year 2024, representing a 13% and 18% growth in U.S. dollars and FX neutral, respectively. These results came below our guidance range of 14% to 17% FX neutral for the fourth quarter and 18.5% to 19.5% FX neutral for the full year. The primary driver for the gap versus our expectations came from a softer-than-expected GMV from existing customers in Brazil, where consumer spending softened. On top of this, the US dollar meaningful appreciation against most currencies, especially the Brazilian real, further pressure our US dollar reported results. Despite Brazil's challenging consumption scenario, as mentioned by Geraldo, we remain confident in our ability to sustain a profitable growth trajectory based on the robust momentum in adding new enterprise customers, our stable and low churn, and our recent product innovation launches. Double-clicking on our revenues Our subscription revenue reached $59.5 million in the fourth quarter of 2024, representing a year-over-year increase of 2% in U.S. dollars and 13% in FX neutral, on top of last year's 36% in U.S. dollars and 27% in FX neutral growth. For the full year, subscription revenue reached $217.7 million, up from $190.3 million in 2023. representing a 14% and 20% growth in US dollars and FX neutral. In 2024, our existing stores revenue increased to $169 million. Our net revenue retention reached 104% in FX neutral. A key driver to net revenue retention, our same-store sales growth reached 10% in FX neutral. Looking at same-store sales throughout 2024, For the first three quarters, same-store sales growth was in the teens level, while in Q4 it dropped to single-digit range, given tougher comps in Argentina and softer consumer spending in Brazil. It's important to mention that the upselling of new features, contract renewals at better terms, and inflation adjustments have partially offset the impact in our net revenue retention from the weaker same-store sales from our customers. On top of our existing stores' growth, We continue attracting new stores, adding $27.9 million in revenue to our base, representing approximately 16% of our 2023 Vitex platform revenue. The solid contract signature momentum is coupled with our LTV over CAC ratio that remains at strong fold, exceeding the six times cash on cash mark. This year, a significant highlight is the continued progress of our existing stores P&L. reinforcing the strength of our inherent attractive business model. Existing stores gross margin increased from 77% in 2023 to 81% in 2024, while operating margin reached 43%, marking 8 percentage points increase year over year. Additionally, given our net revenue retention of 104% in FX neutral, our existing stores P&L is significantly above the rule of 40. giving us confidence in the rule of what to go at maturity. Meanwhile, for new storage margins, we delivered a 10 percentage point improvement in gross margin, year over year, and a 5 percentage point operational leverage improvement in R&D and G&A, which were all basically reinvested into sales and marketing, strategically positioned to seize the significant growth opportunity ahead. Now, analyzing the geographical breakdown of our revenue, in 2024, Revenue generated outside of Brazil accounted for 43.4% of our total revenues. Looking at the year-over-year FX neutral growth by region, Brazil's subscription revenue grew 28% in FX neutral, a slight acceleration versus last year, mostly given the solid sales momentum mentioned throughout the year and despite the year-end softness in same-store sales. Latin America, excluding Brazil's subscription revenue, increased 6% in FX neutral. and removed the Argentina headwind, the region grew at a pace just slightly below Brazil's. And the rest of the world's subscription revenue grew 34% in FX neutral, demonstrating a relevant compounding rate even as we increase the baseline. Moving down our P&L, we have maintained strong discipline on cost and expenses. Important to note that all figures I will now present are non-GAAP. You can find the reconciliation of those measures to the nearest comparable GAAP measures in our fourth quarter 2024 earnings price release on our investor relations website. Our subscription gross profit reached $46.9 million, resulting in 78.9% subscription gross margin, up from 78.6% in the same period last year. Our total gross margin, which includes services, rose to 75.1% compared to 74.1% in Q4 2023. Our total gross margin improvement was mostly driven by the lower mix of services revenue in our total revenue, as we are relying more on our ecosystem to provide implementation services, and to a smaller extent by operational efficiencies in support cost, despite the currency headwind experienced in the fourth quarter. Operating expenses were $33.8 million, slightly below the $34.2 million reported in the prior quarter. resulting in an operating income of $12.4 million, representing a 20.1% margin, up from 19.1% in the same quarter of the prior year. Aligned with this, our free cash flow performance was equally strong, reaching the same $12.4 million and 20.1% margin, consistent with the target model we communicated to the market. The resiliency of our operating income and free cash flow margin clearly demonstrates our natural operational hedge against FX fluctuations, as even though the weighted average of our basket of currencies depreciated approximately 10% year-over-year against the US dollars, we still improved our operating income margin by 1 percentage point and our free cash flow margin by 4.5 percentage points. Looking at the full year, the improvements have being even more significant. Our subscription gross margin improved 196 basis points, reaching 78.2%, while our overall gross margin expanded by 402 basis points, reaching 74.1%. Operating margin improved 9 percentage points, reaching 13%, going from $7.7 million in 2023 to $29.5 million in 2024. Free cash flow also significantly increased from $3.8 million in 2023 to $25.2 million in 2024. We also did strategic capital allocations like WENI and a minority investment in Cinerise and launched a new share repurchase program. Approved by our board of directors on December 3rd, 2024, the program authorizes the repurchase of up to $30 million in Class A common shares and will remain in effect until December 2nd, 2025. In the fourth quarter of 2024, we repurchased 1.8 million Class A common shares at an average price of $6.08 per share, totaling $11.2 million. We will continue to allocate capital with diligence, aligned with our strategic vision, and aiming to maximize long-term returns and value generation for Vitex, our customers, partners, employees, and investors. As we move forward with our business outlook, we remain confident in our business resilience. Despite Brazil's FX volatility and existing customers' GMV softness in the short term, we see an attractive opportunity to help our customers outperform the market, attract new customers, cross-sell our suite of products to our base, and efficiently manage our costs and expenses to deliver operational leverage. Considering this, we are currently targeting FX-neutral year-over-year subscription revenue growth of 13% to 15% for the first quarter of 2025, implying a $51 million to $52 million range. For the full year 2025, as we continue executing our profitable growth strategy, we are targeting FX-neutral year-over-year subscription revenue growth of 14% to 17%. implying a range of $235 to $241 million, based on the quarter-to-date average FX rate. We are targeting non-GAAP operating income and free cash flow margins of meetings. Given the evolution of our partner's ecosystem, we plan to increasingly rely on VTAC's ecosystem of system integrators for new customers' implementations. We view our lower short-term growth rate as temporary, influenced by the abrupt FX devaluation and a softening of consumption in Brazil. Looking ahead, our operational and long-term indicators are showing strong performance. We have seen a significant 23% increase in number of customers generating over $250,000 in ARR, and our deferred revenue has also meaningfully increased by 29% year-over-year. Our annual revenue term remains in the mid-single digits, with larger customers experiencing low single-digit churn. Finally, and not less important, we are excited to be expanding with compelling new products that are enhancing our offerings. Overall, we remain optimistic about the future and look forward to the opportunities that Laya had in the coming years. With that, let's open it up for questions now. Thank you.