Q3 2021 VTEX Earnings Call
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Hello, everyone and welcome to the <unk> earnings Conference call for the quarter ended September 30.
And Korea Investor Relations director for <unk>.
Our senior executives present in today, our cat litter Knoxville yard.
<unk> got to look on that facility Finance Executive officer. Additionally, analytics courtyard, Chief financial officer will be available during today's Q&A 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 predict and technology initiatives.
These statements are based on current available information and our current assumptions expectations of brokerage section about future events.
We believe that our western sales expectations and projections are reasonable in view of the current available information.
<unk> place undue reliance on these.
Forward looking statements.
Ladies and uncertainties are described under risk factors cautionary statements regarding forward looking statements sections of <unk> registration statement on form F. One and other because filings leading 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.
Ill now discuss some non-GAAP measures a reconciliation of those measures to the nearest comparable GAAP measures can be found in the third quarter 'twenty simply one earnings press release available on our Investor Relations website now, let me turn the call over to Sheila that I looked at the floor is yours.
Thank you Juliet welcome everyone and thanks for joining us today.
Good day, and a 221 quarter three earnings results.
<unk> soft geography, they can detect the platforms, it's time to be the operating system for these commerce ecosystem still.
Strong execution enabled us to move closer towards our desired future.
This quarter we.
Had outstanding new contract signatures, we increased our backlog to use OLED stores under implementation and we expanded our relationships with existing customers.
We also continued launches drive its development and signing important partnerships that position ourselves.
Towards creating the future proof platform of choice for enterprise journalism with Davis.
Finally, we also over delivered the guidance we provided to the market. We will cover all disappointed more throughout today's call.
So I invite you to stay with us for the next hours.
You hear more about our progress and the principles guiding our strategy actions.
Exciting times at <unk> Com.
Last year, we witnessed the surge in e-commerce as the consumers' behavior shifts what the further convenient online shopping.
And that trend is here.
Year to state.
As a consequence, our business is showing strong momentum both in the topline growth as well with new contracts signatures.
And this is just to keep up the iceberg E Commerce in Latin America to have been tasked with opportunity.
Quadrant to re market tiers.
2021, before Latin America is the fastest growing region in the world with almost 12% points higher growth and the worldwide average, we're leading in the new era, a resolution and we adhere to accelerated we've continued that taxi premium.
Premier brands to our partners from across the Globe.
Some new customers that went live this quarter that didn't have online presence in the region before work <unk> done on instituting, Brazil referral in Guatemala, and Mexico and AD load in Brazil, We also added.
Customers that migrated from other competitive platforms include has gaslog in Brazil do you.
Imagine timna and meaningful in EW.
Given our focus on zero fictional Gordon and our customers' needs for digital Commerce transformation should remain ahead of the.
The curve it.
It's important to point out that speed to market continue to be a key differentiator and priority project debt for example, with dental instrumentation, the leading specialty standard in Brazil with more than 110 stores and present in more than one.
And in the half with Taylor's across Brazil.
Went live in only four months, we continue to see strong sales momentum new storage contract signature.
As a result year over year, we have doubled our backlog of new online stores and implementation which gives.
Gives us confidence in the future growth of the company.
One highlight win this quarter was Mazda markets.
Shows with Jack to power its commerce digital transformation across 22 countries in Europe.
<unk> mindset.
Vote of confidence is a tremendous honor for all of us at <unk>.
<unk> and another proof that our e-commerce and marketplace capabilities.
Matched for the greatest benefit drives in the market.
As we strive to increase our presence across markets. This global brand enable us to further validate our platform strategy.
The cases.
And strengthen our position in new countries.
The strong momentum with new customers is also validated by external market experts.
This quarter the tax was recognized as a visionary in the Gartner Magic quadrant for digital Commerce 2020.
<unk> report and in the beaches digital commerce use case as well as for BTC and <unk> digital commerce.
Same charter farming Composedly comments use cases into 2021 got the critical capabilities for digital commerce.
Additionally.
<unk> was awarded seven members overall with good math looks for ability to execute and sales and channel enablement by <unk>, a former forest analysis.
It should be commerce luminaries.
Not only do we see strong momentum in new.
These tumors and external validation, but we are also obsessed that didnt get it.
Yes.
<unk> relationship with this premier brands and retailers some current customers that extended their operations with us by opening new online store the new countries during the.
The third quarter's worth.
Tommy Hilfiger in payroll Levi's and Argentina.
<unk> in Chile, Xiaomi in Mexico.
Secrets in Costa Rica.
Additionally, our marketplace solutions continues to gain traction.
Three it has been adopted by APM back co by.
<unk> the capsule many audits we.
We know that we cannot do all based alone.
We believe in the multi client force of collaboration.
One of our key competitors.
It is our ecosystem.
And that's why we will continue to nurture and expand our partners since our last earnings release, we have launching strategic partnerships with AWS Facebook stripe Mercado Libre and next project.
We expect.
Back at the AWS partnership we will enable us in the long term to expand our global digital Commerce strategy.
Customers, especially the CPG one.
We'll now be able to leverage machine learning services, and order management capabilities with logistics and distribution operations.
Advance to create end to end digital solution.
The new global integrations with Facebook.
To ensure that our conversion rates in ecommerce by leveraging online campaigns with data intelligence and improving sales conversion basically of the club.
Furthermore, we hope this is the beginning of a long term partnership with Facebook.
We launched a partnership with stripe to help our customers to offer all the consumer preferred payment.
The integration work.
All countries, where both companies operate in North America.
Latin America, and Asia, supporting payment processing and more than $135.
Yes.
To simplify the integration with Mercado Libre in Brazil is a significant milestone in our journey to become the center of the vast network that natively connect.
Every part of the global digital Commerce ecosystem, we aimed to rollout the simplification across the rest of Latin America soon our strategic partnership with Baxalta, and leading marketplace strategy and implementation agency in Brazil and in the U S et.
Excited not only by the technical and architectural expertise that matched by the digital brings to our customers, but also by the depth and the breadth of business planning the strategy practice they can offer.
Before wrapping up I'd like now to revisit for.
Our four <unk> strategic priority.
Total friction on boarding zero friction collaboration.
<unk> console cameras for every larger and the development platform of choice for digital Commerce.
<unk> done innovating and backward.
Those are the principles that guide our development.
On zero fictional Gordon with launch of self serving on board.
Our goal is to reduce our customers' time to revenue by giving them the tools to connect to the tailored photo faster and with a user friendly experience.
Zero friction collaboration with.
When you sell a portal that enables partners of us customers franchises or smbs to more easily sell into their marketplaces.
<unk> collaborations between the online store the franchisor of physical store seamless we want to become one.
One stop shop solution.
Roche will feature the physical store as an independent seller with the seller tended to create and manage inventory and capacity of the business.
We're building tools for the physical stores to streamline the procurement process.
Very.
Excited with these initiatives as we have success stories that showcases the benefit.
It's the case of CNA.
Triple the sales because of it adding incremental inventory and lower escalate, which resulted in a major boost.
Collyn version right.
We also enhanced our Oems August drugs installed system.
Reducing refresh time to second without external events dependencies, such as manual authorizations cancellation windows and anti fraud.
This fee.
Boost ghostly food and beverage.
That shops companies needs among others.
It enabled them to have faster communications between channels.
The out of stocks and errors and deliver faster should the consumers' doorstep.
And of course.
Keep integrating with more channels and enhancing the existing connections we have as to what I already highlighted.
<unk>.
Applications integration.
On this single console panel for every order front.
Our in store solution.
Moving with the Mentalist Io approach enables physical stores to sell products from other stores.
Well as from the E Commerce experience.
With improved messaging between different channels.
So excuses and added social selling.
With all.
So launched a new dashboard that tracks additional key performance indicators for our customers such as the current share count and statements contractually.
On the development profits almost choice for digital Commerce I already covered all the strategic partnerships, which are fundamental.
The mental enabler for attracting more developers to our platform as the preferred distribution channel. So to complement that let me just share a couple internal kpis with follow on this topic.
Mostly active developers testing detects development.
<unk> increased from more than nine 5000 in Q2 to more than 14000 in Q2.
Additionally, we are excited to announce that this quarter U S developers would the second largest country testing our swap portfolio.
Having grown more than four times versus the last quarter.
We are also focusing on building security privacy and compliance framework.
Features of our platform.
Customers and developers to leverage them.
Our own vision is.
To cover security privacy and compliance into differentiating factors for <unk>.
This topic is a major requirement specially <unk> peer markets, but it will soon be a worldwide requirement.
And we plan to be in the forefront.
Yeah.
Last but not least I would like to state all at 1624 with Texas that had work and continue working each day to fulfill our mission as well at our customers partners and investors.
Now I'll turn the call to Ricardo who can cover our financial progress report for the quarter.
Okay.
Thank you hi, everyone. It's a pleasure to be here updating you on our financial performance for the third quarter of 2021 <unk>.
This quarter, our revenue increased to $31 9 million.
Now for over a year egress of 15, 2% U S dollars and 12, 3% on an FX neutral basis and above our guidance of 31 to $31 5 million.
This increase was on top of our record same quarter last year revenue growth of 140% on an FX neutral basis.
As Covid impact led to a further acceleration of e-commerce and reinforce the importance of having a holistic omni channel strategy.
Although some verticals were impacted by supply chain challenges or lower consumer confidence, which tend to be short term effects revenues associated with new stores is going to bring.
Certain results more than compensated that impact and allow us to over deliver our guidance.
Total revenue two year CAGR for the third quarter of 2021 was 64% on an FX neutral basis of 330 basis point sequential acceleration compared to the prior quarter.
This demonstrates the sustainability and robustness of our revenue growth.
It also demonstrates how diversified across verticals.
Given that <unk> software works well for many different industries, allowing us to perform well, even while some verticals are impacted by macroeconomic events.
July was our toughest comp and as anticipated the comps ready ease throughout the quarter.
We exited the quarter with September year over year, FX neutral growth in the 20% range demonstrating that the gradual normalization trend we were expecting entering towards the end of the year.
We're already starting to do.
Description revenues represented 93% of total revenues, we continue to see strong sales momentum by our sales and marketing team and go lives of new online stores, which drove an increase in our services revenue.
Is it automation year over year.
Juggle our backlog in dollar amounts.
Of new online stores these limitations.
Subscription revenue increased to $29 6 million in the third quarter of 2021 from $26 3 million in the third quarter of 2020.
Year over year increase of 12, 6%.
<unk>.
And nine 7%.
<unk>.
Now moving down our P&L.
Non-GAAP subscription gross profit was $20 2 million compared to $24 million in the second quarter of 2021.
Subscription gross margin was 68, 2% in the third quarter of 2020.
We compare to 68, 8% in the second quarter of 2021.
The quarter over quarter compression reflects incremental investments in cyber security privacy and compliance.
Mostly related to our global expansion and becoming a public company.
We believe we can improve our subscription.
21 gross margin over the coming quarters and in the long term.
We are encouraged by the digital commerce opportunity, especially in Latin America.
An attractive opportunity for further penetration even after the strong acceleration, we all witnessed last year.
Therefore, we have decided to accelerate.
<unk>, our investments to capture this market opportunity and leverage our leadership position in the region as.
As a result, our non-GAAP loss from operations was $13 3 million.
During the third quarter of 2021 compared to a non-GAAP loss from operations of $10 4 million in the second quarter of 2000.
Scripps we continue to see attractive unit economics from our investments to bring new online stores through our platform.
Our LTV to CAC is it still above six times cash on cash even after we tripled our sales and marketing investments compared to the same quarter last year.
We plan to.
'twenty one is focused on new online store additions and we believe it is the right long term decision for the tax even if that has some short term impact to our margins.
As of the three months ended September 32021, <unk> had a negative $10 $4 million free cash flow primarily driven.
We made our non-GAAP loss from operations, which is mostly attributed to sales and marketing and research and development efforts related to our growth stage.
In this regard is important to highlight that this company has grown historically, mostly self funded with limited primary capital injection.
Driven by the already mentioned, we have a powerful business model. We are currently focused on increasing our leadership in Latin America and discovery all the regions.
Given our attractive unit economics, we are more than happy to reinvest back in our business every incremental dollar and even burn cash.
Cash in a disciplined fashion.
Now moving to our outlook, we expect to continue to see strong new stores growth as our encouraging backlog undergo this limitation.
Q4, our existing stores, new face easier comps in Q3 comps during.
During Q4, we expect our revenue.
<unk> growth to continue accelerating wild.
While supply chain challenges may impact.
During Q4.
We are excited to support our customers on a successful black Friday, cyber Monday and the holiday shopping season, we are working closely with our customers to understand how the upper Gary stuck with inventory.
Inventory and so on with that said, we are targeting revenue of 35 $337 $3 million range for the fourth quarter of 2021.
Implying a 27% year over year FX neutral growth rate in the middle of the range for 2021.
Although Latin currencies devalue six 7% during Q3.
We are confirming our guidance of $124 million to $120 million range.
This outlook assumes the current FX rates remain constant for the remainder of the year wrapping up todays.
We want to reinforce that it's clear to us that e-commerce momentum is here to stay.
The current state just the beginning of a promising long road ahead for the region. We are seeing good indicators from the investments we are doing in the region and across other geographies.
Which is reflected in the strong momentum we are seeing in the new contract signatures as well as an increase in our new store backlog on the implementation we have a strong leadership position in Brazil, we continue to quickly strengthen our position in Latin America, and we are starting our global reputation we feel encouraged.
By the opportunity we have in front of us. Thank everyone for joining this conference call. We look forward to keep you updated on our progress next quarter, let's open it up for questions now.
Yeah.
If you would like to ask a question. Please press star followed by one on your telephone keypad now.
If you change your mind and his staff for it by tier.
Our first question comes from Sterling Auty of Jpmorgan. Your line is open. Please go ahead.
Yeah. Thanks, Hi, guys. So one question one follow up.
Just curious in terms of the GMB would you expect that the third quarter would be the bottom in terms of Jim.
<unk> growth you mentioned the revenue acceleration expected in December would you expect the GMB growth to accelerate as well.
Hi.
Great to speak with you. Thanks for the question.
Yes, certainly.
<unk> growth also should be the bottom.
Bottom.
For <unk> in Q3.
We're already seeing an acceleration of GMB as well as we mentioned for for revenue and as you probably remember to set the foundation roughly two thirds of our revenue comes from a take rate.
Our customers in <unk>. So these two are tightly connected.
We are seeing a pickup in <unk> and.
Thats driving recovery on the revenue growth as well.
And as we mentioned there are supply chain impact that.
That can have some some of the impact on there.
<unk> growth, but we are seeing strong pickup in October.
And we feel confident for November and going forward.
That's a perfect segue to my follow up question was actually about the take rate.
If I look at the subscription revenue in the quarter.
Coming in where it did just.
Jimmy <unk>, maybe being a little bit below what we would've expected was there a difference in mix in terms of take rate versus kind of the street subscription fee that you saw in the quarter or what else kind of drove that strength in subscription revenue.
Yes, great Great question.
Disposal, Ed as you probably remember our revenue is driven by existing customers into new customers and then new customers are coming online they have.
Slightly higher because they are being <unk>.
They are not yet, bringing a lot of GNP.
Turning to the platform right. So the flight take rate of new customers is higher than for existing customers and has been ramp up <unk>, which takes roughly six months, sometimes a year.
The trend towards the average take rate of the of the company or the.
Jonathan take rate that they will have right. So these slightly higher equal IEP, great that youre mentioning is mostly driven by.
More new customers, joining the platform, which we see as an encouraging trend and I think we mentioned during the prepared remarks.
That we are seeing strong sales momentum and that our backlog level on a dollar amount on a year over year basis. So this is an encouraging trend that we're seeing.
Understood. Thank you.
Our next question comes from Josh Beck of Keybank.
Your line is open. Please go ahead.
Many thanks for taking the question.
I wanted to follow up on your last point, there, which I think you both had mentioned.
The backlog doubling so maybe just help us double click there.
If you were to look at.
Keybanc, the verticals, where you're seeing the momentum or the geographies any other really standouts underneath that that backlog strength.
Yes happy to take this one and then others on the call may want to chime.
And let's look right.
So Josh it is.
It's across the board, it's not specific to one segment. So the beat tax platform works well across different industries.
And we are expanding globally, we are seeing strong momentum and continue to see very strong momentum.
In Brazil.
Where we have a strong market share so the backlog in Brazil has increased.
And we see further opportunity to continue growing in Brazil.
As you know we are investing a lot.
In Latin America outside of Brazil.
Pretty much to triple our sales and Mark.
Marketing investments in Latin America outside of Brazil, If you look at over the past 12 months.
So as expected these additional sales and marketing team is bringing pipeline and bringing new opportunities and these are getting signed and this goes into the backlog.
And just to take a step back on the sales cycle right. It takes on average six months.
Between the RFP launch and the contract signature and then.
Customers stays in the backlog for an average of six months because the contract is signed and takes about six months for the contract.
Start to go live.
And because we increased our investments in Latin America outside of Brazil.
A lot of the backlog increase.
While driven by Latin America outside of Brazil, but we are also seeing increasing backlog.
In Brazil and outside of the region outside of Latin America.
So.
All segments and industries not specific to one industry, it's across the board on geographies, we see a good trend.
In the geographies.
But we see a bigger increase in Latin America outside of Brazil, given that the region.
Region that we made most of our sales and marketing investments.
Fantastic and very very good.
That momentum.
I wanted to follow up on the supply chain impacts as we've gone through this earnings season. It has been.
Really varied.
I feel like some of the really large enterprise companies, even Walmart and target as we have said their inventory levels are well positioned for the holiday season, So I think in the.
True enterprise.
The dynamics I think once you get into SMB, there's probably less preparation so I'm just curious.
As you look into next year do you feel like for maybe the customers that had supply chain issues, but there could be some type of overhang in the the metric that I'm really trying to think through is net revenue retention.
We should maybe factor in some type of <unk>.
Impact too.
Some of those non enterprise customers as we start to think about next year.
Yeah.
Yes, Josh Thanks for the question.
It's very hard to answer this precisely right I mean, what I can share what we saw during Q3 and how we are.
You are starting to see the performance of Q4.
Yes.
The supply chain issues impacted mostly the <unk>.
Electronics and home appliances, and although these are enterprise customers and they can prepare.
Can they have more.
Better processes around supply chain planning.
And they can see some of these trends before some of the SMB.
<unk> chips, the out of stock or if they can they can just get the raw materials to make their products.
That does impact a little bit this company's Rachel.
And.
As we have seen this shoe.
<unk> key segments being impacted we are.
Also seen now in Q4.
Stronger.
Growth in <unk> than we were expecting so.
Hard to say if they are.
<unk> I think it's early for that but maybe the war stocking for.
These holiday season.
For to be ready for this important moment for the industry right.
Now looking forward to two.
2022, and the net revenue retention.
We would love to have more insight on that but I think it's very early to know how these trends will.
Will evolve, but we do like the perspective that the enterprise customers.
Customers.
Brain because of their processes and their preparation and being able to be more prepare and control their inventory. So they have less ruptures than some other.
Wallet players.
Right. So so.
So we like our customer base than we'd like.
They tried to position themselves and we tried to stay very close to them on how they are preparing.
And stocking for the holiday season, and understanding also they are planning for the season right I mean there.
The uncertainty that there is always uncertainty.
On these topics, but we try to stay close with them.
So we can help them get the best <unk> possible during this season.
Very helpful context, Thank you team.
There is some.
Our next question comes from Diego <unk> of Goldman Sachs. Your line is open. Please go ahead.
Yes.
Good morning, everybody. Thanks for taking my question actually the first question regarding the current economic environment.
Volume in Brazil.
We're now seeing inflation picking up in the current period, partially driven by that.
BRL devaluation. So I was just wondering if you can comment on how these two factors could end up impacting our business in the short term. Thank.
Thank you.
Yes, Thanks Thanksgiving.
So first on the FX devaluation right I think as we mentioned on the on the earnings release.
There was a meaningful devaluation of the Latam currencies during Q3, right roughly six 7% devaluation already.
Already has a weighted average by the beat tax revenue.
By currency right.
Example, you can take Brazil as you mentioned.
In fact in Brazil was five <unk>.
Sure.
In June body, and then I think like almost <unk>, 544% by.
By September 30, so it's almost like 90% devaluation during the quarter and even though there was the six 7% devaluation.
Which will impact our Q4 revenue in dollar amounts so reduce our expected revenue.
For Q4, just because of currency a variable that we don't control.
Keeping the guidance for the year right. So yes in the short term.
Currency.
On on on our business, but if you think about long term.
<unk> and <unk> being a high growth company and bid.
Inflation differential being a couple percentage points as it has been historically.
FX is not a important driver for us.
There is volatility in the quarter in the short term you may see some impact but in the loan.
Long term high growth company with FX being a couple of percentage points impact per year.
We don't see us.
Meaningful long term impact, but again in the short term it could impact us.
Quickly on inflation.
We are seeing inflation is not just in Brazil right.
Brian and Lisa.
A global phenomenon.
You can also see high inflation.
The U S speaking up.
Maybe slightly higher on the 10% LTE.
LTM, but the U S at 6% or so right.
It's important to mention that the way our business.
Motto is designed we are very well protected against deflation because.
Two thirds of our revenue comes from take rates on our customers' GMB and as inflation impact the economy. The GMB of our customers increases naturally because they are selling the goods that are driving.
Inflation and recaptured these ultimately because of our business model and its not a renegotiation of a foreign check of trying to increase prices or anything like that just flows through because of the take rate. So although we are seeing.
<unk> deflation.
Giving these in the global economy.
We feel well positioned because of the business model that we have.
Let me pause here I don't know is that although if you want to add a few more thoughts on the topic.
Yes.
Your point is exactly what was going to talk.
<unk>.
There are several reasons why we like the take rate competent in our subscription revenue one of them. The biggest one is the alignment of interest beyond the one.
We truly believe that in the long term GM V E Commerce will grow much more.
And any other metric, but also when we when we started.
Building a business model based on Jim.
Hello, Mariano and I, we are here for 20 years, we saw the hyperinflation in Brazil, the inflation and usually.
<unk>.
In the country.
But ours.
Inflation stabilization.
It's very difficult to really good shape content and disputed where do you have inflation and recession at the same time and so this.
Business model that we have also protects us from.
Charging glass in real terms in the long term because.
Adjusted contract.
Sure.
The agreements with our customers because of this confidence so I do I do believe that these tenants, especially in the long term.
Company.
Countries are kind of protected against it.
The fact of pressuring the suppliers.
In our case us.
Because of the inflation.
Let's.
That's very very helpful.
Maybe just a follow up question.
The.
Ah.
Existence.
Okay simulated sequentially in the fourth quarter so mature.
This was partially driven by FX movements and.
By the way some as well, but maybe if you can just help us to understand the trends in there and comment on the performance of the GP units and by client vertical.
Between industries, I think that would be great. Thank you.
Perfect. Thanks for the question.
As you can imagine is very hard to precisely calculate the impact of some of these supply chain challenges or lower consumer confidence.
And we said we are seeing some countries.
And as they are.
They're winded with other variables in doing these set there is viable cell analysis is almost impossible.
But having said that right historically.
Seasonality is that Q3, GMB is usually is likely higher than.
Is that true GMT.
And this year he was actually in a roughly $115 million lower.
And doing some round number calculations, if you divide our revenue by <unk> get to an average take rate of roughly one 3% and youll have.
Also remember that only two thirds of all revenues based on GMB.
Thus.
You can at least one 3% on these $150 million lower <unk> that we don't control.
Sure.
Driven by the macro in some way.
And you multiply by two.
Yields that I mentioned, it's almost $1 $5 million.
Directional impact of these events.
In the quarter.
And even and this was mostly as we said in our home appliances and electronics, a little bit on furniture.
And.
Third and.
There is this short potential short term impact.
Being exposed to dnb, but we love that for the long term because as Latin America.
Very underpenetrated and as these penetration increase overtime.
The <unk> increase.
Greece's, we naturally capture that growth in our revenue growth. So we like having the GMB exposure, but it is a variable that we don't control and during these macro events could have some some impact but even considering this.
Directional impact that our nation.
We over deliver.
And Vince with $31 $9 million range I was from 31 to 31 five.
Okay.
Customer support is very good we don't controlling the short term it naturally we don't control the loans, but we have a good bet that in the long term.
<unk> revenue too Jim is the big deal eventually in order to have this big disruption because of.
The supply chain, just after Covid and we had this.
Very small impact in our in our revenue.
Just the short term.
We are beating the guidance and everything.
It's not that it's the end of the word but in the long term.
Very optimistic to be attached to the GM view of our customers.
That's very helpful. Thank you both for being very clear thinking.
Yes.
<unk>.
As a reminder, if you would like to ask a question. Please press star followed by one on your telephone keypad now.
Have a question from Fred Mendes of Bank of America. Your line is open. Please go ahead.
Hello, Good morning, everyone and thanks for the go ahead two questions as well the first.
Sales and marketing expense increase.
Almost 10% part of the quarter I'm, just wondering are you guys expanding.
That means the marketing campaign or that basically the price of the digital channels that are let's say more expenses.
Let's say you are doing kind of the same but it's been a little bit more.
Mark.
This process will be my first question.
And then on the second question I think the more expertise to one I look at it.
Our head count.
You almost doubled over the last 12 months with this market.
We of course are not small add on.
Synergies.
Uh huh.
One.
Two to increase over the next products.
My second question. Thank you.
Hi, Mariano here.
I am cofounder and Cosco shareholder this introducing myself.
<unk>.
Counter most part of DSM and investment is in people.
<unk>.
So we are seeing.
Inquiries on the opportunities arising.
The text and we need to prepare the people for these so the most of the part of the investment is directly to people.
Okay.
To highlight spread.
So im sorry, Im sorry continue to grow but it's important to highlight that this company is Jared.
Not sensitive traditional market.
Most of our exact meeting at the name is people don't buy AD words, we don't buy.
The change to sell activities like like almost irrelevant to our expenses in <unk> and sales and marketing.
Because we are moving a few upstairs company in an ecosystem.
To be more precise as a contraceptive solution engineering.
Gary.
People are engaging on the opportunities that's arriving.
Perfect I think by the end of this is a very clear and then and then on the second one.
In terms of the head count you already believe it or not.
Collateral oriented opportunity.
To develop projects I mean, obviously as we grow we'll be hiring more people with a big volume that we haven't seen recently should we.
Continue our ability to already.
Low level for this cycle.
Yes, happy aperture to take the question.
Brian Thanks for the question.
Yes.
As we explained.
During the IPO process in the last quarter.
We are seeing a very strong opportunity for us to capturing the market as.
The pandemic completely shifted the mine.
Set off the C level and board members of these enterprises and they are accelerating their digital transformation.
We we are in a market where penetration is very low.
Our unit economics is very attractive.
And the customer is very sticky right our.
Churn continues to be mid single digits right. So.
These all said it makes a lot of sense for us to invest now and capture these opportunities.
<unk> customers to <unk>.
And as we mentioned roughly half of our new customers like weakened so we want to capture them.
Been trying to do these customer from another platform and the switching costs believes both ways right. Once the customer joins our platform they tend to stay with us, but it's also hard to take customers from other platforms.
We have been successful in doing it but it has to be at the right time at the right place.
Partner needs to be feeling some type of pain like trying to do omni channel solution or scaling our black Friday, and I will be able to switch.
Switch to us so anyway. It makes a lot of sense for us to invest now to capture discussing that and thats, what we have been doing over the past year.
Now as we start to accelerate expenses in Q3 last year.
So.
We see that we did a lot of the heavy lifting already as you said, we almost doubled the head count.
Year over year.
<unk> forward.
Don't see the same pace of increase headcount.
But we feel.
There is an opportunity to continue investing and as we are seeing a strong sales momentum and we've seen our backlog increasing.
We feel it's important to invest to continue capturing these opportunities.
And driving the growth of the company going forward.
Perfect.
Thank you.
There are no further questions from the lines at this time, so I'll turn the call back over to Joe Albi.
Thank you very much so.
We are.
To make sure that.
Opportunities that I have to finalize the call to thank you all again to join our earnings call Conference.
Our first step as a public company, we're very happy and humbled to share there.
Steps with you.
Tax.
Commissions were always sizeable and you are enabling us to dream even bigger.
Thank you for that and for our company.
Such an important moment.
We will continue executing at the highest standards to continue to be.
<unk> partner for enterprises.
Business in this new DC to Europe.
Thank you very much.
See you next quarter.
This concludes today's call. Thank you for joining you may now disconnect your lines.
Thanks.
Yeah.
[music].
Thanks.
Yeah.