Q4 2022 VTEX Earnings Call
Okay.
Speaker 1: Thank you for attending today's VTech Fourth Quarter 2022 Financial Results Conference Call. My name is Megan and I'll be your moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end.
Speaker 1: I would now like to pass the conference over to Julia Vitor-Hernandez with V-TECHs.
Speaker 2: Julia, please go ahead. Hello, everyone, and welcome to the Vitex Earnings Conference call for the quarter ended December 31, 2022. I'm Julia Batar-Famandes, Investor Relations Director for Vitex. Our senior executives presenting today are Geraldo Thomas, Jr., Founder and Co-CEO, and Ricardo Camato-Sodre, Chief Financial Officer.
Speaker 2: Additionally, Mariana Lomida de Faria, founder and co-CEO, and Andrés Pollidoro, Chief Strategy Officer, will be at a level due to the Q&A session.
Speaker 2: I would like to remind you that management may make forward-looking statements related to such matters as continuing growth prospects of the company, industry trends, and product and technology initiatives.
Speaker 2: 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 a new reliance on these forward-looking statements. We believe that our assumptions, expectations and projections are reasonable in view of
Speaker 2: Certain risks and uncertainties are described under risk factors and forward-looking segment sections of the BTS form 20F of the year-end of December 31, 2022, and other BTS filings within the U.S. Security and Exchange Commission, which are available on our investor relations website. Finally, I would like to remind you that during the course of this conference call, we may discuss some non-GAHD measures.
Speaker 2: A reconciliation of those measures to the nearest comparable GAAP measures can be found in our fourth quarter 2020 earnings press release available on our investor relations website. Now let me turn the call over to Geraldo. Geraldo, the floor is yours.
Speaker 3: Thank you, Julia. Welcome, everyone, and thanks for joining our fourth quarter 2022 Earnings Conference call. 2022 was a year filled with uncertainty and volatility for being a adoptee.
Speaker 3: Few, despite the challenges, are customers' performance and business model demonstrated with resiliency and the ability to navigate the ever-changing environment smoothly.
Speaker 3: In 2022, e-commerce in Latin America grew single digits.
Speaker 3: while RGMV growth reached 31%, exceeding the market performance by more than 20%.
Speaker 3: The text customer same-store sales increased to 17% on an FX neutral basis, indicating that in addition to new customer ads, existing customers performed above the curve and contributed significantly to our outperformance versus the overall market.
Speaker 3: As we move forward, our focus for 2023 is clear. We aim to consistently drive growth above market performance, improve our gross margin and optimize expenses to gain operational efficiencies as we scale. Our goal is to provide a reliable solution to our customers.
Speaker 3: continue to strengthen our comprehensive range of assisted sales products to enable our customers to grow their GMG.
Speaker 3: Our global expansion journey is evolving with solid steps made in the US and Europe . We also announced that customers going to other countries such as India and South Africa this year. We expect to continue to deliver consistent and tangible results aiming to become the global backbone for commerce.
Speaker 3: Reflecting on the performance of the last quarter of 2022, we are delighted to report that our business has seen resilient growth. Although GMV and revenue were below our expectations, we have solidified our position as a regional leader and expanded our reach beyond Latin America.
Speaker 3: Specifically, in Q4, our GMV increased by 34% year-over-year in US dollars and 29% on an FX neutral basis, reaching almost the 4 billion mark in a quarter. This makes more than our GMV for the entire year of 2019.
Speaker 3: It was noted that retail industry faced challenges during the Q4 of 2022, due to lower than expected sales volumes around Black Friday and the holiday season. Despite being factored by this trend, our business maintained strong performance.
Speaker 3: With Q4, same-store sales improving quarter over quarter. This demonstrates our business strength, resiliency, and ability to navigate challenging macroeconomic environments.
Speaker 3: Throughout our company history, we have established solid and long-term relationship with our customers, as evidenced by the growing number of stores and countries per customer. In 2022, we were honored to have the trust of over 2,600 customers.
Speaker 3: with a total of 3,400 stores across 38 countries.
Speaker 3: Our top 100 customers in 2022 averaged 5.9 stores per customer with operations in 34 countries, an improvement from 4.8 stores per customer in 2021.
Speaker 3: In the fourth quarter, we kept making significant commercial progress. We are proud to have attracted and avoided several premier brands and retailers.
Speaker 3: In the fourth quarter of 2022, we added several new customers who previously did not have an online presence in the countries they started operating with us.
Speaker 3: This includes Reebok in Argentina, Brazil, Chirico, Colombia and Peru, Superpow in Bretas in Brazil, Impost Fresh in Poland and Old Navy in Mexico.
Speaker 3: We've also added customers that migrated from other platforms.
Speaker 3: This includes companies that went live in Q4 such as Oba Ortifluci in Brazil, Garmini in Colombia, and D'Anoni Fontvalle in Spain.
Speaker 3: These brands are well established in their respective markets and we are excited to have them on board as they will help us expand our reach and strengthen our position in these regions.
Speaker 3: In addition to attracting new customers, we also focused on strengthening our relationship with existing customers.
Speaker 3: by supporting their expansion efforts.
Speaker 3: During the fourth quarter, several Premier brands and retailers chose to expand their operation with us by opening new stores and further integrating with us.
Speaker 3: This includes Bell Corp who added stores in Mexico and Peru, currently operating in four countries in Latin America. Elatro Lux who added a store in Brazil, currently operating in six countries in Latin America. Samsung who added B2B in Brazil, currently operating both B2C and B2B with us.
Speaker 3: and Carrefour who integrated more than 150 physical stores into the omni-channel operations in Brazil.
Speaker 3: This brand's decision to expand their operation with us is a testament of our platform's strength, relevant value proposition, and the trust we provide to our customers. We are excited to continue supporting them and enriching consumers in new geographies and leveraging their physical storage assets today.
Speaker 3: I would like to briefly mention a significant event this quarter, the Black Friday month in November . Vitex achieved a GMV of $1.75 billion, an increase of 32% in USD compared to November 2021 and 27% on an FX neutral basis.
Speaker 3: We were particularly proud of two accomplishments during the holiday season. The dependability of our network, which provided scalability, reliability, and security while giving our customers peace of mind with 100% of time during Black Friday and Cyber Monday average.
Speaker 3: and the growth in volumes in countries such as Mexico and the United States, both of which joined the top five countries with the highest year-over-year GMV dollar increase among all the text countries demonstrating international expansion tangible results.
Speaker 3: 2022 was a year where we were excited to announce many outstanding partnerships, such as the one with Adiene, AWS, eBanks, Facebook, Instagram, Mercado Libre, Mercado Pargo, PayPal, Stripe, and TikTok.
Speaker 3: In Q4 we added deals with Triasil and Uwe among others.
Speaker 3: We entered into a partnership agreement with ClearSale, a company specialized in digital anti-fraud solutions in Brazil and with global expression ambitions.
Speaker 3: Clear sales plugin gives us customers the peace of mind and trust to maintain approval rate and avoid false positives.
Speaker 3: According to ClearSale, it increases average customers' approval rate by more than 10%.
Speaker 3: With Nouveau, we entered into our global partnership that will provide greater flexibility and customizations for retailers as V-TACs expand deeper into Latin America and new markets across Asia Pacific, North America and Europe . This new partnership is already available for V-TACs customers around the globe.
Speaker 3: I'm eager to share with you some examples that demonstrate the capability of our platform and how our customers have achieved exceptional results.
Speaker 3: A leading global kitchen and laundry appliance company through its global account has continued to expand its partnership with Zetec.
Speaker 3: Our global contract signed by Vitex US branch was a crucial factor in successfully launching their high-end home appliance brand in Europe .
Speaker 3: Our customer is now utilizing a composable approach in AMEA with Vitek's new customizer checkout solution, which allows customers to have more flexibility in their checkout page by leveraging Vitek's APIs with all store framework components. Our high-end home appliance brand
Speaker 3: fully adopted the headless approach in the frontend with its new e-commerce website for onion
Speaker 3: With that, they can now select the tools they need to create a tailored user experience and quickly build content with shopping experiences without starting from scratch.
Speaker 3: Motorola, leverage its global contact too long, its online story in India.
Speaker 3: The localization provided by VTACs in that region was crucial for the successful implementation, particularly during the local regulatory compliance framework. On top of that, the easy integration of third parties helped Motorola to enable multiple 3PLs, third-party logistics.
Speaker 3: Motorola has also highlighted that the Vitef's customer success team was extremely helpful in addressing all technical challenges without needing third-party vendors.
Speaker 3: They went live with a new homepage layout, including different banners and sections that were extremely easy to customize for their non-technical team.
Speaker 3: As a result, Motorola has benefited from a fast checkout process and an intuitive website navigation, which has increased its conversion rates. We continue to attract new customers in Europe , including Enchant, one of the world's largest retailers with a relevant presence across Europe .
Speaker 3: who went live with the text in Q4 to relaunch its online operations by introducing new features to enhance the customer experience in Home
Speaker 3: The new platform is more user friendly and offers new integrated functionalities that can be accessed for any device, including fresh product delivery along with new delivery and pickup locations.
Speaker 3: Pitex is also helping ASEAN with website page loading speed and mobile adaptability.
Speaker 3: There are still more features for customers and user generated content improvements to come. I'll show and to provide the first class online shopping experience that complements what consumers are already finding in their physical stores by leveraging our solution. The growth city industry is undergoing a digital transformation.
Speaker 3: with the commerce operations being the fastest growing subsector according to a report by Statista. Vitex through its fast store platform has established itself as the go-to partner for retailers offering this type of service.
Speaker 3: It does this by leveraging its omni-channel capabilities and time-saving features for speed and flexibility, increasing efficiency and boosting sales by integrating brick-and-mortar inventory and onboarding third-party sellers from a wider product selection.
Speaker 3: with no added operational costs. Additionally, VTAC's distributed art and management system allows retailers and brands to handle complex fulfillment scenarios, leveraging multiple commerce channels to offer various delivery options while streamlining operations.
Speaker 3: These enable grocery commerce channels to provide fasting store and curbside pickup by assembling orders from multiple inventory stores such as pickup locations, distribution centers and other brick and mortar stores resulting in optimal fulfillment.
Speaker 3: For example, Tencom sued a large conglomerate with a range of products from grocery to home improvement to us V-TACs to run their 14-g operation. The company has been operating with us since 2016 with V-TAC's new speed delivery filter capability. A few years later,EEEE. WHAT!
Speaker 3: They increase their conversion rates, accelerating sales and customer satisfaction level.
Speaker 3: Vitek's highly customized solution is helping them to sort different categories and sessions, improving their search tools and models to show the best promotions and delivery time for their customers.
Speaker 3: Along these lines, Carrefour, a leading French multinational corporation specializing in retail, selected Vitex in 2020 to operate in Brazil, the second largest market worldwide, among other Latin American countries.
Speaker 3: CAHIFU has a strong presence in Brazil with 817 stores, including 241 supermarkets and 41 supermarkets offering both grocery and no grocery products.
Speaker 3: The company selected to significantly improve its performance in other management, marketplace, and omnichannel service.
Speaker 3: This migration was made possible due to the scalability offered by Vitex, which allowed for seamless control of the vast number of SKUs in their catalog and the sheer volume of clients in the database.
Speaker 3: More recently, in Q4 of 2022, Kajir Food integrated their physical stores with our O&S capabilities, including the ability to orchestrate multiple omni-channel strategies, personalized search based on previous purchases, click and collect options, improved home delivery services, and an integrated POS system, among others.
Speaker 3: These enhancements will leverage carrefour-feet-go-stores asset base and adapt to the lead to an improved customer experience and increase the operation efficiency for carrefour.
Our live shopping feature, a native live streaming application that enables brands and retailers to utilize Vitex's common spotter form to create engaging one-to-many or one-to-one live shopping experiences is boosting engagement and conversion rates, attracting more customers to our base.
This feature is opening up new growth opportunities for our customers by streamlining the process of starting, planning, managing and monitoring the performance of live shopping events.
This quarter we had 302 events with a 21 increased quarter of a quarter and there were 912 events in 2022.
To conclude the operational update, I would like to express my gratitude to our 1347 of the tax employees who are dedicated to making a declared future reality as well as to our customers, partners and investors. I will now hand the call over to Ricardo to discuss our financial performance for the
our revenue increase to $45.5 billion, a year-over-year increase of 23% in US dollars and 20% in FX News adapted to this last-)
Subscription revenue reached $42.7 million in the fourth quarter of 2022 from $34.5 million in the same quarter last year, a year-over-year increase of 24% in US dollars and 20% in FX neutral. This will help us achieve a revenue of $157.6 million for 2022.
showing a 25% growth in US dollars and 22% on a tax neutral basis.
Although below our expectations, given weak market performance during Black Friday week and the cancellation of the tax-free day in Colombia, our relative performance versus the overall market gives us confidence in our future growth projections. Our revenue from existing stores increased to $113.8 million in 2022.
representing a net revenue retention of 105% on FX neutral basis.
When analyzing the number on an annual basis, we see a stable net revenue retention compared to last year. Although still volatile, given macro uncertainty, the excess net revenue retention pays for this year was higher than the annual average.
after many quarters of being impacted by tough COVID-19 Comps in fiscal stores reopening.
On top of our existing source growth, we continue attracting new stores, adding $21.3 million in revenue to our base, representing 20% of our 2021 Vitex platform revenue.
Our sales efficiency measures as new sole revenues from the current year divided by the known gap sales and marketing expenses from the prior year decreased this year, as we anticipated last year it roots.
Although that resulted in lower unit economics, our LTV over CAC remained healthy and still over 6 times.
The decrease is due to the fact that we invested during 2021 a higher portion in regions where our sales efficiency is lower, such as the US and Europe , accounting for 35% of sales to marketing expenses.
Additionally, and not part of our initial expectations, during 2022, we also experienced the elongations in our customers' implementation and run-pop times, which also impacted this work, pushing revenues further out, as mentioned in the previous quarters.
With that said, towards the end of 2022, we have already made meaningful adjustments in our sales and marketing expenses to improve our sales efficiency ratio. Among new customers, we are excited to announce that we continue to gain traction in the high end of the market. For more information, visit our website.
reached 94 from 76 in 2021 and their number of stores reached 557 from 424 in 2021 representing a year-over-year increase of 24% and 31% respectively.
We have consistently demonstrated improvement in this metric, which we believe is the strongest validation of the suitability of our product for even the most demanding customers within this segment.
We continue expanding our geographical reach with revenues outside of Brazil accounting for 45% of our total revenues.
In a three-year FX neutral CAGR, Latin America, excluding Brazil, grew 57%, while the rest of the world grew 78%.
Regarding our FX neutral EO for year growth in 2022, Brazil grew 24%, Latin America excluding Brazil grew 14% and the rest of the world grew 47%.
The growth in Latin America acts in Brazil this year was influenced by a larger share of customers with relevant fiscal source that were fully operational in 2022, which generated a rebalancing between their online and offline operations. Additionally, although Argentina saw lower growth rates given its macro situation, it was also seen as a major
Countries like Mexico are experiencing significant growth and gaining a larger share in the mix. Latin America holds immense potential. 2022 growth rates do not fully reflect it, especially as Mexico continues to gain momentum and 2023 starts to have cleaner year-over-year comps.
Now, moving down our P&L, non-GAAP subscription gross profit was $31.4 million compared to $24.1 million in the fourth quarter of 2021.
non-GAAP subscription gross margin was 73.5% in the fourth quarter of 2022, compared to 69.9% in the same quarter of 2021. The 360 BIPs year-over-year margin expansion shows the commitment of our team to keep improving our margins.
We also continue improving our services non-GAAP gross margin, resulting in an even higher non-GAAP gross margin expansion, 514 bps year-over-year. Our performance has remained steady compared to last quarter's 73.8% non-GAAP subscription gross margin, declining only 30 bps. This is mainly due to us scaling our infrastructure to handle increased sales during the pandemic.
$9.1 million in the fourth quarter of 2022, from $32.4 million in the prior quarter and $36.5 million in the same period last year.
The current results reflect the organization restructuring we implemented in the second quarter of 2022, and further marginal optimizations following the third and fourth quarters of 2022.
As a result of the better than expected gross margin improvements and controlled expenses, with the top line showing resilience, our non-GAAP operating income improved from a negative 29.3% margin in the same quarter last year to a positive 4.6% margin in the fourth quarter 2022.
This represents a 33.9% improvement year over year.
It is important to remember that the operation of break-even achieved in Q4 is not yet sustainable, as our industry experiences a positive seasonal trend during the fourth quarter, which has contributed to our current performance.
With that in mind, we reaffirm that by the fourth quarter of 2023, we will be able to sustainably achieve positive non-GAAP operating income. As of the three months ended December 31, 2022, V-TECH had a positive $2.5 million free cash flow compared to a negative $3.3 million free cash flow in the prior quarter and a negative $21.3 million free cash flow in the fourth quarter.
$17 million. We've purchased slightly less than 3.3 million shares at an average price of $3.90 per share.
We expect to continue executing our plan based on the evaluation of market conditions and applicable legal requirements.
Before moving to our Q1 and full year 2023 outlook, I would like to remind the audience that from a business perspective, we think about our P&L as a combination of two P&Ls, our existing stores P&L and our new stores P&L. You'll find this reference in slide 28 of our fourth quarter earnings presentation.
VTEC's existing stores revenue, excluding our SMB platform, represented almost 85% of total revenues. While our new stores revenue, also excluding our SMB platform, represented approximately 15% of total revenues.
Comparing our P&L breakdown for 2022 and 2021, I would like to make a couple of comments. This year our gross margin reached 67%, approximately 600 pips higher than the overall gross margin from 2021. It's noteworthy that both existing and new stores have been
our expenses in 2022 and even though we don't have yet a full year clean P&L, we can already see how operating margins for existing stores increased from 15% in 2021 to low 20s in 2022 as well as operational margin losses from new stores improved by 16 percentage points.
As a result, we had an overall operational margin improvement of 11 percentage points year over year. With more to come this year, since we are exiting the year with our operational margin approaching a sustainable break even. As we move forward with our business outlook, it is important to note that the macroeconomic conditions remain uncertain. We have closely discussed the rider's grading system, including an auto process plan to remove an ac violations. It is to ensure a manual to determine scientists that were able to obtain data from it in 2021.
Compared to historical averages, we continue to see an un-logated sales cycle related to an increase in the average time to implement the Vitex platform and longer run-pop times for new customers.
Despite these challenges, which mostly impact our new stores' time-through revenue, we remain confident in our ability to help our customers outperform the market and control our costs and expenses to deliver meaningful operational leverage.
Considering the uncertain macro conditions, we are currently targeting revenue in the $41.0 million to $41.5 million range for the first quarter of 2023, implying a year-over-year growth of 19% in US dollars and on an FX neutral basis in the middle of the range.
Also, given the persistent macroeconomic volatility for the full year 2023, we target FX neutral year-over-year revenue growth between 15% and 19%, implying a range of $183 million to $189 million based on February FX rates.
With that, let's open it up for questions now. Thank you.
If you would like to ask a question, please press star followed by 1 on your telephone keypad. If for any reason you would like to remove that question, please press star followed by 2. Again, to ask a question, press star 1.
As a reminder, if you are using a speakerphone, please remember to pick up your handset before asking your question. We will pause here briefly as questions are registered. Our first question comes from the line of Marcelo Santos with JP Morgan. Your line is now open.
Hi, good evening. Thanks for taking my question. My first question, I want to explore a bit more the gap between GMV and revenue growth. I think in the previous quarter there was a raise in gap that widened to I think more than 10 points in US dollars. So just wanted to understand the moving parts here.
The second question is regarding the selling expense. I think that was maybe the most noteworthy line. It declined to I think around $11 million. It's the lowest liable since the first quarter.
Could you please describe, is this just a result of the headcount cuts? What else is there in the sustainable level going forward? Thank you. Hi, Marcelo. Thanks for the question. I'll take the first one. Okay, thank you so much, Marcelo.
So as we mentioned in the Q&A from last quarter's earnings release, it is crucial to note that the company's revenue is derived from fixed fees and a take rate on our customers' GMP. Two-thirds of the revenue comes from the take rate, while the remaining one-third comes from fixed fees. Considering that
it is natural to have a lower implied take rate into four because this is no strong GMD dilutes the fixed fee portion of our revenue. For instance, the implied take rate of the fourth quarter of 2022, although below the fourth quarter of 2021, was in line with the fourth quarter of 2020.
These changes in implied take rate is simply a function of our revenue model and mostly driven by makes.
It is important information that we are not seeing pricing pressure when comparing like-for-like figures.
On this point, regarding mix, as mentioned in the prepared remarks, we are adding larger customers to the base who come with a lower variable take rate following our price table. Finally, it's worth noting as well that we are passing through inflation to the fixed key component of our contracts in most countries.
While this is more challenging to achieve in developed economies, we have managed to do so in Brazil and are beginning to implement in some countries in LATAM outside of Brazil as well.
For the second question, I will pass it over to Mariano. So on the second question, we see a good momentum to do the adjustment from what we saw in 2021 and 2022. So we keep seeing a strong pipeline in Brazil at that time.
in the expenses. Do not expect to generate any write-off of opportunity.
is in the opposite side. So we are seeing with a lean team, we can absorb more and more the opportunities of this uncertain team that we are seeing in the market.
So we don't expect any decrease of our sales operations in terms of performance.
Thank you very much.
Thank you very much. Thank you.
Our next question comes from the line of Fred Mendez with Bank of America.
Your line is unwoken. Hello, good evening. Everyone, thanks for the call. I have two questions as well. The first one is just call the attention. This second, let's say, reduction in headcounts. Obviously, the word is changing fast. But why just trying to understand a little bit of the strategy and the impact on the team. And then the second... The second...
when you're doing this shift towards increasing profitability. Thank you.
Thank you for the question. This is Geraldo getting the answer. How are you? So we are maintaining the discipline operational model and we are achieving our – to achieve our short, medium and long term growth objectives and potentials.
We don't feel like we're missing opportunities, giving the adjustment made, like Mariano said. It's actually the opposite. We feel that being leaner and more agile will enable us to quickly adapt and generate value in these uncertain times.
The current growth rate is below naturally on our long-term growth potential, considered the macroeconomic conditions. And we, although we adjust the team to face the current demand, I would say that we are still and we are considered to be very strong.
in our investment for the long term. You see that our R&D team, they're very strong until today and we're continue investing and eventually growing the team a little bit during the year. And as Mariano said...
We're adjusting the sales team for the current demand. I think we're in the end we're well positioned to continue winning market share. And this will enable us to come out stronger once the market is stabilized. So we can deploy additional capture to capture the outstanding market opportunity that we have in front of us.
Perfect, very clear Gerardo, thank you.
Perfect. Very, very clear here, Aldo. Thank you. Thank you.
Our next question comes from the line of Clark Jeffries with Piper Sandler. Your line is so open. Hello thank you for taking the question. The first one is on guidance Ricardo. Is it safe to say that the most important?
you know factor contemplated in the revenue guidance is this dynamic around deployment times looking at the sort of trend lines of existing software contribution, new store contribution Is that really the sort of meaning behind?
all of this and then you know with reference to that exit rate being higher than the 105, do you expect 2023 to be a year where it's above 105? Hi Clark, thanks for your question. Yes, it's fair to say your assumption.
As mentioned in the prepared remarks, we continue to see macro uncertainty. This is the environment of high interest rates and inflation may impact consumer consumption, which may impact our same source sales and the revenue growth from our existing stores. But as also mentioned, the more relevant impact is that we continue to see.
by table but longer than average implementation times and ramp up times, which impacted our new store revenue growth during part of 2022, and we expect to impact the full year of 2023. These two factors contributed combined resulting in a potentially lower growth in 2023.
which we reflected in our guidance. Having said that we believe we have made the necessary adjustment to come out stronger once this macro situation is resolved. We are capturing market share as your automation and we have a well-invested structure to support our long-term growth, which we believe is above the current growth rates that are impacted by the macro scenario.
Certainly, and then one follow up, you know, great to see.
20 plus percent margins on the existing store cohort. Higher margins on the new cohort, especially considering that was a full year number. And I'm sure there's. All said and done the cost reduction initiatives in the 2nd, half mean that a higher rate if we were to annualize it.
Do you expect those trends to continue in the next year? Would you expect existing stores to maintain that kind of 20 handle in terms of margins? And then any sense for dynamics in terms of margins on new store and all other revenue be that SMB and services? You you you you?
Yeah, hi Clark. No, that's a good question. So the disclosure that we are making on the P&L splitting between existing stores and new stores, it's an annual cut. So that's a 2022 for a year margin. So this 22% margin, it's reflected for a year. But as you
in 2023 for the existing stores who have a higher margin than in 2022. So we'll continue to operate in a disciplined way but given the operational leverage that should help us moving forward.
Thank you very much.
Thank you very much. Thank you.
Our next question comes from the line of Josh Beck with Keybank. Your line is now open.
Hey guys, this is Maddie on for Josh. Thank you for taking my questions. My first question for you is how are you guys thinking about LTV to CAC compared to maybe the historical average and do you have a goal for that metric going forward? 5. Why does it matter?
Do you think that we've hit the bottom in terms of the headcount where is that? Hi, Betty. Thanks for the question. Happy to take the first one. Regarding LTV over CAC, as we mentioned, the prepared remarks. Marks.
It continues to stay above six times, and we believe this level is a healthy level for a company like ourselves. We also look at the internal rate of returns and the payback time of our customers since we have a pretty low turn. So we don't wanna rely on cash flows that are coming from the customers that are far off in advance later in the future.
But we do believe that the six times LCV over CAC is a healthy.
metric for us to pursue. Sorry on the second question could you repeat please?
Yeah, I was just wondering if we've hit the bottom in terms of the head count number, or if there might be more reductions.
We've hit the bottom in terms of the head count number. Or if there might be more reductions implied.
I can take that. I can take that. You know, like for I would say that for R&D, we're very comfortable with the head content we have and when we might slide.
very increase a little bit depending on the talents that we find in the street that want to join the dance. For the sales and marketing, I would say that it seems to me that yes, we wish to have a bottom but you know like this is.
This is very variable with the actual demand that we find. Eventually, if we didn't hit the bottom of the demand, eventually we might adjust in the future again. But that's not what we are projecting right now.
Very helpful. And then for my follow-up, I was just wondering if you guys can give an update on how the AWS partnership is going. And then secondarily, if you could say if B2B trends are seeing the same sorts of headwinds as B2C or if there's any difference there. Thanks. And if we could just name them all as AWS starved modelling trend, the work at AWS spaghetti
Okay, Mariano here. So AWS is one of the foundation's partner of VTECs. And in the go-to market of United States and Europe , they are helping us a lot. So we are part of the marketplace solution of AWS and AWS Raps are kind of matching resources with VTECs Raps in the field and offering B2B.
Yes, we are seeing in the United States particularly a Solid trend on B2B signatures on our contracts. So we already released some public public names on the B2B and we are consistently seeing a signature squatter over quatter on the B2B market
Wonderful. Thank you, guys.
Thank you. Our next question comes from the line of Andre Salas with UBS. Your line is open.
Hi, good evening everyone. Thanks for taking my question. I have one question regarding competition here. We have seen some movements in Brazil from other platforms which are more focused on smaller business, trying to target larger customers here. Are you seeing substantial changes here in the competition environment in Brazil?
especially in your lower base clients or this is more specific movement. Thank you. Thank you. Thank you for the question. Mariano here. We of course saw a kind of every year we do have a new player trying to penetrate Latin America and they can come from the high end.
all the low end and we saw a Shopify penetrating the Latin America market but on our low SMB solution loging together we didn't see any kind of a huge growth changes in what we expect so we are on track of what we expect from the company. Yes there are some kind of a sleeping from the other vendors.
any closing remarks.
In conclusion, while 2022 may have presented some challenges, we are optimistic about our ability to drive growth and overcome obstacles in 2023 despite the uncertain micro-economic environments. We are committed to delivering architectural service and support our customers.
and expanding our operations in key regions. We look forward to the opportunities and progress that the new year will bring.
Thank you everyone for joining us today. I'm looking forward to updating about our progress in our next college call. Thank you. That concludes the VTEC's fourth quarter 2022 financial results conference call. Thank you for your participation. I hope you have a wonderful day.