VTEX

Hello, everyone, and welcome to the VTEX earnings conference call for the quarter ended March 31st, 2026. I'm Julia Bater Fernandez, VP of Investor Relations for VTEX. Our senior executives presenting today are Geraldo Thomas, Jr., founder and co-CEO, and Ricardo Camata-Sodre, chief financial officer. Additionally, Mariano Gomes de 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 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, your caution not to place and your reliance on these forward-looking statements. Certain risks and uncertainties are described on the risk factors and forward-looking statement sections of VTEX Form 20F and other VTEX filings within the U.S. Securities and Exchange Commission, which are available on our investor relation 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 2026 earnings press release available on our investor relation website. With that, Geraldo, the floor is all yours.

Thank you, Julia, and good afternoon, everyone. Thank you for joining us. Last quarter, we outlined a clear strategic framework centered on four key growth factors, global expansion, B2B, retail media, and AI. In the first quarter, we continued to execute against this strategy. Today, we'll update you on several recent product launches that directly reinforce our positioning across these opportunities. From a financial perspective, our top line results were in line with our guidance, while our profitability and cash generation both doubled year over year and exceeded our guidance. This reinforces the resilience of our model and our disciplined execution in a dynamic macro environment. While we acknowledge that recent growth has been below our long-term ambitions, we remain committed to executing with discipline and driving long-term value creation. Starting with our vision and product launches, we're seeing our industry entering a new phase where artificial intelligence transitions from a conceptual layer into a structural driver of growth, efficiency, and competitive advantage. We see this as an attractive opportunity for BTEX. In the last technological revolution, the cloud, we have architected our platform to fully embrace it from inception with a multi-tenant approach, avoiding the technical debt that constrains many legacy systems. Now, a highly scalable foundation position us to capitalize on the AI technological shift enabling us to rapidly deploy innovation and operate at scale as we navigate this new era. At the heart of this transformation is our reinvented VTech commerce platform. We are moving beyond the traditional software-as-a-service model to deliver the first AI-native commerce suite, one that delivers simplicity, ease of use, and most importantly, tangible and measurable business outcomes for our customers. This is AI with real impact. The command center for this new paradigm is the VTX AI workspace. This is where our agents for catalog promotions and search and collaborate. They are engineered to do more than just flag problems. They autonomously diagnose root causes architect strategic action plans, and execute them with minimal human oversight. For example, our catalog agent doesn't just manage data. It hunts for revenue opportunities. It systematically analyzes an entire product assortment by leveraging real-time shopper navigation data to understand precisely where and how the catalog should change to increase conversions. It sees where customers drop off, what search terms lead to dead end, and how they interact with product attributes. Armed with these insights, the agent autonomously optimizes the catalog. It goes beyond simple data entry, performing tailored content improvements across millions of SKUs by enriching descriptions, standardizing attributes, and ensuring every item perfectly aligned with our brand's merchandise guidelines. This allows our customers to maintain a high-quality, high-converting catalog at a scale and speed previously unimaginable, turning a traditionally labor-intensive process into a strategic advantage. This is just one of many intelligent experiences that are now possible. By laying this foundation groundwork, we're paving the way not only to expand our own suite of agents, but to eventually enable a marketplace where customers and partners can deploy third-party agents, creating a truly open and accessible conversation ecosystem. And this intelligence extends far beyond the back office. It transforms the entire customer journey. for shoppers. Our new storefront with AI personal shopper combined conversational interactions, semantic search, and hyper-personalization to guide discovery and dramatically increase conversion rates. For our B2B customers, we're streamlining complex sales cycle with B2B commerce and AI order quotes. enabling sales teams to generate complete, accurate quotes instantly from a simple file upload or even a voice command. More broadly, our B2B and global expansion strategies are being significantly enhanced as the inherent complexity of managing multi-country, multi-current operations is precisely the challenge our AI workspace is designed to address at scale. to capture demand wherever it emerged. Our integrations with Google Universal Commerce Protocol enable shoppers to discover products and check out directly within Gemini and Google AI mode with a native cart sync back to our platform. And to empower our entire ecosystem, we introduced the VHS AI developer toolkit and bending AI assistance directly into developer workflow across tools like Cursor, Copilot, and others, while connecting them to VTech's knowledge base to accelerate development and drive innovation. With delivering a platform where AI enhances efficiency for operators, drives conversion for shoppers, accelerates sales for B2B teams, and empowers developers to build faster. This is a complete end-to-end vision for AI native commerce. But today, Vitek is much more than its commerce platform. We have evolved into a multi-product company. Beyond our core commerce platform, we now offer two additional strategic solutions, our CX platform and our Ads platform, both enhanced with AI where we have also introduced significant recent advancements. In our CX platform, we are expanding beyond the traditional storefront to capture demand, wherever it originates. The VTech CX platform redefines customer experience to coordinated AI agents that operate seamlessly across the entire journey making comments more fluid and conversational. This includes a truly multi-channel approach where AI guides discovery and transactions across website, WhatsApp, and other messaging interfaces. We have introduced a fully integrated WhatsApp store, enabling consumers to complete their entire purchase journey without leaving the conversation. as well as voice commerce for real-time interactions. Importantly, this capability extends into the post-purchase phase, where autonomous post-sales agents manage order status, exchanges, and returns with over 91% automation, allowing human teams to focus on more complex, high-value engagements. In our ads platform, we significantly enhancing the power of our platform by embedding AI across audience orchestration and campaign execution. This enables our customers to transform their digital environment into high margin media assets and unlock new revenue streams. With our AI campaign management capabilities, Retailers and their brands and partners can move beyond manual workflows, simply defining an objective, such as improving return on ad spend, while AI agents autonomously build and optimize multi-channel campaigns to deliver results. This is further strengthened by AI-driven insights, offering real-time visibility into performance, attribution, and market share, all within privacy-first framework supported by our secure data cleanroom. Ultimately, we are helping customers convert their traffic into a scalable and strategic growth level. While we have just launched these updates, we are already seeing some early but encouraging results. For instance, Whirlpool has leveraged our AI capability to identify underperforming products diagnose content gaps, and automatically generate optimized assets, compressing what once took days of manual work into minutes while improved conversion. At Decathlon, our promotions agents enable real-time competitive responses through automated campaign recommendations. Across these use cases, the pattern is clear. AI is poised to redefine how customers drive sales. accelerate execution, and capture new levels of operational efficiency. These outcomes are particularly relevant in the context of enterprise commerce, where operations are complex, mission critical, and increasingly global. Customers are not simply selecting a software vendor. They're selecting a strategic backbone that can scale, adapt, and evolve with the next generation of commerce. We acknowledge that it's early days and our excitement around these innovations is not yet reflected in our current growth rates. To be fully transparent, we're still evaluating the long-term transformational impact of these tools at scale. However, our commitment is to remain data-driven and grounded in reality, and we look forward to updating you on broader adoptions in the coming quarters. We have embedded AI at the core of Vitex, transforming the company into the first AI native commerce suite. We believe Vitex is uniquely positioned to serve this role. Our multi-talented software-as-a-service architecture, outcome-aligned business model, and deep transactional data foundation allow us to deploy innovation at scale and align directly with our customer success. With that, Let me welcome some new customers who went live this first quarter of 2026, including Central Guard in Argentina, Armazém Paraíba and Lunelli in Brazil, VPCL in Canada, Home Century in Colombia, and Omikaza in Portugal. We also expanded our relationship with our existing customers, such as Whirlpool, that launches Compra Direta Parceiros in Brazil. It's official B2B channel for distributors, resellers, and authorized service centers. Electrolux that launches a B2B channel in Chile. Grupo Ikezaki that launches IBC Atacado de Beleza in Brazil. It's official B2B channel for beauty professionals and resellers. Multilaser that launches the official opal store in Brazil. expanding the smartphone brand's presence in the country, and Lindit that expanded to Chile, adding to its operation in Brazil. Now, before I hand the call over to Ricardo, I would like to express my sincere gratitude to our 1,147 Vitex employees, our customers, partners, and investors for their continued trust and support. Together, we're building the future of commerce. Ricardo, over to you.

Thank you, Geraldo. Hi, everyone. I'm pleased to share with you VTech's financial results. In Q1, 2026, GMV reached $5.1 billion, up 17% in U.S. dollars and 7% FX neutral. Subscription revenue was $60.0 million versus $52.6 million in Q1, 2025, an increase of 14% in U.S. dollars and 4% FX neutral. The moderation in GMB growth relative to last quarter was primarily driven by Brazil, where the high interest rate environment and persistent promotional marketplace behavior continue to pressure consumer demand in proprietary channels. In Q1, our non-GAAP subscription gross margin reached 81.5%, representing an expansion of 240 basis points year over year. This improvement is mainly driven by structural gains in AI power automation in customer support and, to a smaller extent, a positive FX tailwind. Our total gross margin, including services, reached 80.0%, an expansion of 400 basis points year-over-year. This continued improvement reflects not only steady gains in subscription gross margin, but also our deliberate de-emphasis of services, as our global partner ecosystem increasingly leads complex implementations with reduced reliance on VTEX-led services. Our expense management continues to reflect our discipline in alignment with long-term growth priorities. Total non-GAAP operating expenses in the first quarter were $38 million, up 6% year-over-year. While sales and marketing and G&A remain relatively stable, we deliberately increase investment in R&D, focusing on innovation, product development, and AI capabilities that reinforce our competitive positioning. In other words, Even as we expand margins, we are simultaneously strengthening the foundation for sustainable, profitable growth. As a result, our non-GAAP income from operations reached $10.6 million, doubling from $5.3 million in Q1 2025. This also represented a non-GAAP operating margin of 17.4%, a 7.7% over year. In short, our operational discipline continues to translate into stronger margins and a more profitable growth trajectory while we focus on revenue reacceleration. Non-GAAP net income was $8.1 million in Q1 2026, up 51% year-over-year. This earnings step-up reflects strong underlying operational performance driven by operating leverage and efficiency gains, reinforcing the sustainability of our model. This was partially offset by unrealized mark-to-market losses on our U.S. dollar-denominated investment-grade cash position held in Cayman, following a significant repricing of the yield curve toward the end of the quarter, which has already recovered in April. Discontinued profitability gains keep showing up in our cash generation, which remains strong once again this quarter. Free cash flow for the quarter was $13.3 million, doubling year-over-year and reaching a free cash flow margin of 21.9%. We also maintain a disciplined approach to share repurchases. During the first quarter, under the $50 million 12-month share repurchase program for Class A shares approved in February of 2026, we repurchased 2.5 million Class A common shares at an average price of $3.86 per share for a total cost of $9.7 million. As we look ahead, our focus remains on disciplined execution as we work toward growth reacceleration. focus on our four growth levers, global expansion, B2B, ads, and AI. While macro headwinds persist, particularly in Brazil, where high interest rates and promotional marketplace behavior continue to wait on GMV growth, we remain encouraged by the quality of new customer additions, our competitive positioning among global enterprise customers, and the compelling market opportunity across our four key long-term growth initiatives. Importantly, While this affects our near-term growth outlook, it does not change our conviction in the structural opportunity across our four growth levers, nor our ability to continue improving profitability. With that, for Q2 2026, we expect subscription revenue to grow at the low to mid single-digit percentage rate on an FX-neutral year-over-year basis. Gross profit to grow at a mid-single-digit percentage rate on an FX-neutral year-over-year basis. Non-GAAP income from operations should be in the high teens to low 20s percentage margin. And free cash flow should be in the high teens to low 20s percentage margin. For the full year 2026, we now expect subscription revenue to grow at a mid-single-digit percentage rate on an FX-neutral year-over-year basis. and gross profit to grow at a high single-digit FX neutral rate, while maintaining our outlook for non-GAAP income from operations in the low 20s percentage margin and free cash flow also in the low 20s percentage margin. Assuming FX rates remain broadly consistent with April's average rates, the FX neutral growth guidance outlined above would translate into higher reported U.S. dollar subscription revenue growth adding approximately 10.3 percentage points in the second quarter and 8.6 percentage points to the full year 2026. We continue executing with discipline, investing behind our four growth levers to drive durable growth and shareholder value while improving profitability and maintaining a strong balance sheet. With that, let's open up for questions now. Thank you.