VTEX Reports Third Quarter 2023 Financial Results
VTEX (NYSE: VTEX) the global enterprise digital commerce platform for premier brands and retailers, today announced results for the third quarter of 2023 ended September 30, 2023. VTEX results have be...
GMV and total revenue YoY growth reached 35% and 31%, respectively
Gross profit increased 36% YoY, representing a margin expansion of 292 bps
Non-GAAP operating income and free cash flow reached $1.7 million and $2.7 million, respectively
NEW YORK: VTEX (NYSE: VTEX) the global enterprise digital commerce platform for premier brands and retailers, today announced results for the third quarter of 2023 ended September 30, 2023. VTEX results have been prepared in accordance with International Accounting Standard 34, “Interim Financial Reporting”.
Geraldo Thomaz Jr., founder and co-CEO of VTEX, commented, “VTEX had another solid quarter. Our GMV and revenue accelerated to a notable pace under uncertain macro conditions while we continued to deliver gross margin improvements and expenses discipline, demonstrating an attractive balance of growth investments and profitability. Our focus on execution and the operational leverage of our business model allowed us to deliver our breakeven goal one quarter ahead of schedule.” Mariano Gomide de Faria, founder and co-CEO of VTEX, added, “VTEX is becoming the preferred platform for forward-thinking leaders. Notable customer wins and the successful launch of Beautycounter in the US mark another relevant milestone in our global expansion journey. VTEX Connect success in Mexico also demonstrates our expansion potential in Latam. Validating our world-class product, Gartner recognized VTEX in second place in three out of five of its digital commerce critical capabilities, and as one of the best rated digital commerce platforms by Gartner Peer Insights in the last twelve months.”
Third Quarter 2023 Financial Highlights
- GMV reached US$4.0 billion in the third quarter of 2023, representing a YoY increase of 35.2% in USD and 27.8% on an FX neutral basis.
- Total revenue increased to US$50.6 million in the third quarter of 2023, from US$38.8 million in the third quarter of 2022, representing a YoY increase of 30.6% in USD and 24.5% on an FX neutral basis.
- Subscription revenue represented 93.9% of total revenues and increased to US$47.5 million in the third quarter of 2023, from US$36.5 million in the third quarter of 2022, a YoY increase of 30.2% in USD and 24.2% on an FX neutral basis.
- Non-GAAP subscription gross profit was US$36.2 million in the third quarter of 2023, compared to US$26.9 million in the third quarter of 2022, representing a YoY increase of 34.6% in USD and 27.7% on an FX neutral basis.
- Non-GAAP subscription gross margin was 76.2% in the third quarter of 2023, compared to 73.8% in the same quarter of 2022. Non-GAAP subscription gross profit margin 247 bps YoY expansion was mainly attributable to operational hosting cost efficiencies, support cost optimization, among other impacts.
- Non-GAAP income from operations was US$1.7 million during the third quarter of 2023, compared to a Non-GAAP loss from operations of US$1.5 million in the second quarter of 2023 and a Non-GAAP loss from operations of US$6.0 million in the same quarter of 2022.
- Non-GAAP positive free cash flow was US$2.7 million during the third quarter of 2023, compared to a Non-GAAP negative free cash flow of US$3.3 million both in the second quarter of 2023 and in the same quarter of 2022.
- Our total headcount decreased to 1,276 as of September 30, 2023, representing a decrease of 9.2% YoY and a decrease of 2.2% QoQ.
- On August 8, 2023 the Board of Directors authorized the repurchase of shares of the Company's Class A common shares for an aggregate consideration of up to US$20.0 million. As of September 30, 2023, we repurchased 1.9 million shares at an average price of US$5.53 per share for a total cost of US$9.9 million. Considering the previous plan that concluded on August 8, 2023, the total repurchased shares amounted to 9.0 million, with an average price of US$4.16 per share and a total cost of US$37.9 million.
Third Quarter 2023 Commercial Highlights:
- New customers that initiated their operations with us, among others: Naldo in Argentina, Aiwa, Preçolandia and PicPay B2B in Brazil, Ren-Wil in Canada, ICB Food in Chile, CoopiDrogas, Gabrica, Eurosuper and Mattelsa in Colombia, Vianney and Farma Piel in Mexico, and Beautycounter and Pierce Manufacturing B2B in the US.
- Existing customers expanding their operations with us by opening new online stores, among others:
- Calvin Klein, who added a new store in Ecuador, now operating in nine countries in Latin America;
- Farmacity, who added their Simplicity brand in Argentina, now operating with four stores in Argentina and one in Uruguay;
- Reebok, who added a store in Panama, operating in six countries in Latin America; and
- Whirlpool, who added their Kitchenaid brand in Austria, Denmark, Finland, France, UK, and Italy, now operating in Latin America, EMEA, and APAC.
Third Quarter 2023 Operational Highlights:
We innovate aligned with our guiding principles. We express our brand through the success of our customers. VTEX key operational highlights this quarter are:
- Zero friction onboarding and collaboration:
- The Foschini Group, a leading South African retailer with 26 diverse brands, leveraged VTEX to launch "Bash," integrating 18 brands into one customizable marketplace. Post-launch, multi-brand orders surged by 73%, and app sales quickly reached over 35% of total online sales within two months, boasting a conversion rate exceeding 200% for mobile web and 80% for desktop. Additionally, page load speed improved by 33%, enhancing the overall user experience.
- Sorte Online, a leading Brazilian platform specialized in lottery intermediation, adopted VTEX's headless approach for greater frontend autonomy, improving their go-to-market strategy. This move led to increased conversion rates across all channels (organic, direct, paid media) due to reduced latency and VTEX's scalability for high traffic without downtime.
- An aftermarket vendor in the US, has embarked on a collaboration project with VTEX to evolve their B2B online experience and improve customer experience, search and track product details, while benefiting from VTEX master data capabilities to manage their extensive SKU catalog.
- A global clothing and accessories retailer with 11 online stores and 10 marketplaces across 39 countries, adopted VTEX's headless CMS approach. This integration allows them to easily customize and manage webpage content, enhancing performance by minimizing errors and content loss.
- At NY Fashion Week, PatBo partnered with VTEX for a Live Shopping event, being the only Brazilian brand to host a fashion show at the event. The results were impressive, with a 300% increase in sales, a 125% surge in orders, and a notable 79% rise in average order value, underscoring Live Shopping's growing efficacy.
- During VTEX Connect Latam, the Live Shopping experience thrived with the Live Booth, hosting seven 40-minute events with an average of 447 viewers each. Notably, KitchenAid, a participating brand, enjoyed a remarkable 152% increase in sales. AI Tags, a new feature introduced during the event, enabled live presenters to identify products in real-time, enhancing the overall Live Shopping experience.
- In Argentina, the TV show "Bailando por un Sueño" seamlessly integrated with Style Store, a VTEX customer utilizing a streaming solution for Live Shopping. The result: over 75K viewers during the live broadcast and an astounding 700% sales boost compared to the previous month. This event showcased Live Shopping's evolving landscape and its potential for remarkable sales growth.
- Single control panel for every order
- Naldo, an Argentine retail brand with 70+ stores in 14 states, opted for the VTEX platform. This choice streamlined their vast SKU management, enabled payment and promotion features, and integrated logistics with third parties, enhancing sales opportunities and customer experience.
- Commerce on auto-pilot and co-pilot
- Farma Conde, a well-known Brazilian pharmacy chain with numerous physical stores, joined forces with VTEX for omnichannel capabilities. They've integrated over 160 stores into VTEX's platform, using features like regionalization and intelligent search to improve the customer experience. Farma Conde also utilizes third-party solutions from the VTEX ecosystem, including Mercado Pago for payments and Google Analytics for performance metrics.
- Sergio K., a high-end Brazilian men's fashion brand, adopted VTEX's composable architecture for their digital commerce platform. With VTEX IO, they enhanced the customer experience by implementing features like the wishlist. Sergio K. also optimized deliveries with VTEX Shipping Network and utilized Google Analytics for easy sales data tracking, resulting in a 7x order conversion rate increase, 25% higher AOV, and a 60% reduction in shipping costs.
- The development platform of choice for digital commerce
- Pague Menos, a leading player in pharmaceutical retail and a long-term VTEX partner, leveraged VTEX's flexibility to swiftly integrate Extrafarma using VTEX IO Store Framework in just 29 days. This strategic move led to remarkable sales growth, a 200% boost in conversion rates, and cost reductions, reinforcing Pague Menos Group's financial efficiency while uniting both stores seamlessly.
Business Outlook
The integration of ecommerce to leverage existing physical stores has become a crucial aspect of the business strategy for enterprise brands and retailers. Consumers now expect a seamless shopping experience, whether they're browsing online or in-store. Omnichannel has gone from being a desirable feature to a vital tool for engaging with consumers in a consistent and relevant manner.
Although the global macroeconomic environment imposes challenges to retailers and ecommerce players, our company has not seen any significant deterioration in our most relevant long-term performance metrics. This is a testament to the resilience of our business model and our ability to adapt to changing market conditions.
Although the macroeconomic scenario remains uncertain, we see an encouraging stabilization on our sale cycle in the current quarter. We are closely monitoring the performance of our customers and sales funnel and taking necessary actions to ensure our business's continued growth and success.
In this context, we are currently targeting revenue for the fourth quarter of 2023 in the US$55.0 million to US$57.0 million range, implying a YoY growth of 22% on an FX neutral basis in the middle of the range.
For the full year 2023, considering the current performance of the company, we are increasing the bottom and the top of the range, now targeting the full year to end between 22% to 23% on an FX-neutral YoY basis, implying a range of US$196 million to US$198 million based on October average FX rate and assuming a devaluation of Argentina’s currency aligned with market futures rates.
As we continue executing our strategy for profitable growth, we anticipate YoY improvements in our Non-GAAP operating income margin in the fourth quarter 2023.
We are confident in VTEX's ability to navigate the uncertainties posed by the current macroeconomic scenario. We are empowering our customers to digitally transform their commerce operations while helping them to outperform the market.
The business outlook provided above constitutes forward-looking information within the meaning of applicable securities laws and is based on a number of assumptions and subject to a number of risks. Actual results could vary materially as a result of numerous factors, including certain risk factors, many of which are beyond VTEX’s control. See the cautionary note regarding ''Forward-Looking Statements'' below. Fluctuations in VTEX’s operating results may be particularly pronounced in the current economic environment. There can not be an assurance that VTEX will achieve these results.
The following table summarizes certain key financial and operating metrics for the three months and nine months ended September 30, 2023 and 2022.
| Three months ended September 30, | Nine months ended September 30, | ||
(in millions of US$, except as otherwise indicated) | 2023 | 2022 | 2023 | 2022 |
GMV | 3,999.3 | 2,957.5 | 11,141.5 | 8,783.9 |
GMV growth YoY FXN (1) | 27.8% | 28.7% | 23.2% | 25.8% |
Revenue | 50.6 | 38.8 | 140.8 | 112.1 |
Revenue growth YoY FXN (1) | 24.5% | 22.0% | 23.2% | 23.4% |
Non-GAAP subscription gross profit (2)(4) | 36.2 | 26.9 | 99.3 | 76.2 |
Non-GAAP subscription gross profit margin (3)(4) | 76.2% | 73.8% | 75.2% | 72.0% |
Non-GAAP income (loss) from operations (4) | 1.7 | (6.0) | (3.9) | (37.2) |
Total number of employees | 1,276 | 1,405 | 1,276 | 1,405 |
(1) Calculated by using the average monthly exchange rates for the applicable months during 2022, adjusted by inflation in countries with hyperinflation, and applying them to the corresponding months in 2023, as applicable, so as to calculate what our results would have been had exchange rates remained stable from one year to the next.
(2) Corresponds to our subscription revenues minus our subscription costs.
(3) Corresponds to our subscription gross profit divided by subscription revenues.
(4) Reconciliation of Non-GAAP metrics can be found in tables below.
Conference Call and Webcast
The conference call may be accessed by dialing +1-888-660-6011 (Conference ID – 1918046–) and requesting inclusion in the call for VTEX.
The live conference call can be accessed via audio webcast at the investor relations section of the Company's website, at https://www.investors.vtex.com/.
An archive of the webcast will be available for one week following the conclusion of the conference call.
Definition of Selected Operational Metrics
“ARR” means annual recurring revenue, calculated as subscription revenue in the most recent quarter multiplied by four.
“Customers” means companies ranging from small and medium-sized businesses to larger enterprises that pay to use VTEX’s platform.
“GMV” means the total value of customer orders processed through our platform, including value-added taxes and shipping. Our GMV does not include the value of orders processed by our SMB customers or B2B transactions.
“FX Neutral” or “FXN” means a way of using the average monthly exchange rates for each month during the previous year, adjusted by inflation in countries with hyper-inflation, and applying them to the corresponding months of the current year, so as to calculate what results would have been had exchange rates remained stable from one year to the next.
“SSS” means same-store-sales calculated on a yearly basis by dividing the GMV of active online stores in the current period by the GMV of the same active online same stores in the prior period.
“Stores” or “Active Stores” means the number of unique domains generating gross merchandise value. Each customer might have multiple stores.
Special Note Regarding Non-GAAP financial metrics
For the convenience of investors, this document presents certain Non-GAAP financial measures, which are not recognized under IFRS, specifically Non-GAAP subscription gross profit, Non-GAAP Income (Loss) from Operations, Non-GAAP Free Cash Flow and FX Neutral measures.
We understand that Non-GAAP subscription gross profit, Non-GAAP Income (Loss) from Operations, Non-GAAP Free Cash Flow and FX Neutral measures have limitations as analytical tools, and you should not consider them in isolation or as substitutes for analysis of our results of operations presented in accordance with IFRS. Additionally, our calculations of Non-GAAP subscription gross profit, Non-GAAP Income (Loss) from Operations, Free Cash Flow and FX Neutral measures may be different from the calculation used by other companies, including our competitors, and therefore, our measures may not be comparable to those of other companies.
Reconciliation of Non-GAAP measures
The following table presents a reconciliation of our Non-GAAP subscription gross profit to subscription gross profit for the following periods:
| Three months ended September 30, | Nine months ended September 30, | ||
(in millions of US$, except as otherwise indicated) | 2023 | 2022 | 2023 | 2022 |
Subscription revenue | 47.5 | 36.5 | 132.1 | 105.7 |
Subscription cost | (11.4) | (9.8) | (32.9) | (29.9) |
Subscription gross profit | 36.1 | 26.8 | 99.1 | 75.8 |
Share-based compensation | 0.1 | 0.2 | 0.2 | 0.3 |
Non-GAAP subscription gross profit | 36.2 | 26.9 | 99.3 | 76.2 |
Non-GAAP subscription gross margin | 76.2% | 73.8% | 75.2% | 72.0% |
The following table presents a reconciliation of our Non-GAAP expenses to expenses for the following periods:
Sales & Marketing | Three months ended September 30, | Nine months ended September 30, | ||
(in millions of US$, except as otherwise indicated) | 2023 | 2022 | 2023 | 2022 |
Sales & Marketing expense | (15.1) | (16.2) | (44.3) | (55.4) |
Share-based compensation expense | 1.0 | 1.3 | 3.3 | 1.7 |
Amortization and adjustment related to acquisitions | 0.3 | 0.3 | 0.9 | 0.9 |
Non-GAAP Sales & Marketing expense | (13.8) | (14.6) | (40.1) | (52.7) |
Research & Development | Three months ended September 30, | Nine months ended September 30, | ||
(in millions of US$, except as otherwise indicated) | 2023 | 2022 | 2023 | 2022 |
Research & Development expense | (15.5) | (13.8) | (45.8) | (43.1) |
Share-based compensation expense | 1.9 | 2.0 | 5.6 | 3.1 |
Amortization and adjustment related to acquisitions | 0.3 | 0.2 | 0.9 | 0.7 |
Non-GAAP Research & Development expense | (13.3) | (11.6) | (39.3) | (39.4) |
General & Administrative | Three months ended September 30, | Nine months ended September 30, | ||
(in millions of US$, except as otherwise indicated) | 2023 | 2022 | 2023 | 2022 |
General & Administrative expense | (8.4) | (6.9) | (24.5) | (21.3) |
Share-based compensation expense | 1.5 | 1.3 | 4.9 | 2.9 |
Amortization and adjustment related to acquisitions | 0.0 | 0.0 | 0.0 | 0.0 |
Non-GAAP General & Administrative expense | (6.9) | (5.7) | (19.6) | (18.4) |
The following table presents a reconciliation of our Non-GAAP loss from operations to loss from operations for the following periods:
| Three months ended September 30, | Nine months ended September 30, | ||
(in millions of US$, except as otherwise indicated) | 2023 | 2022 | 2023 | 2022 |
Loss from operations | (3.5) | (11.3) | (20.3) | (46.9) |
Share-based compensation expense | 4.6 | 4.8 | 14.4 | 8.2 |
Amortization and adjustment related to acquisitions | 0.6 | 0.5 | 2.0 | 1.6 |
Non-GAAP income (loss) from operations | 1.7 | (6.0) | (3.9) | (37.2) |
The following table presents a reconciliation of our Non-GAAP free cash flow to net cash used by operating activities for the following periods:
| Three months ended September 30, | Nine months ended September 30, | ||
(in millions of US$, except as otherwise indicated) | 2023 | 2022 | 2023 | 2022 |
Net cash provided by (used in) by operating activities | 2.8 | (3.2) | (5.4) | (31.8) |
Acquisitions of intangibles | - | - | - | - |
Acquisitions of property and equipment | (0.1) | (0.1) | (0.3) | (0.3) |
Non-GAAP free cash flow | 2.7 | (3.3) | (5.7) | (32.1) |
The following table sets forth the FX neutral measures related to our reported results of the operations for the three months period ended September 30, 2023:
| Three months ended September 30, | |||||
As Reported | FXN | As Reported | FXN | |||
(in millions of US$, except as otherwise indicated) | 3Q23 | 3Q22 | Percentage change | 3Q23 | 3Q22 | Percentage change |
Subscription revenue | 47.5 | 36.5 | 30.2% | 45.3 | 36.5 | 24.2% |
Services revenue | 3.1 | 2.2 | 37.6% | 2.9 | 2.2 | 30.5% |
Total revenue | 50.6 | 38.8 | 30.6% | 48.3 | 38.8 | 24.5% |
Gross profit | 35.6 | 26.1 | 36.3% | 33.8 | 26.1 | 29.2% |
Loss from operation | (3.5) | (11.3) |
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