Q1 2024 VTEX Earnings Call

Please wait the conference will begin shortly.

Yeah.

Operator: Thank you for standing by, and welcome to the VTAC's first quarter 2024 financial results conference call. All lines have been placed on mute to prevent any background noise.

Thank you for standing by and welcome to the <unk> first quarter 2024 financial results Conference call. All lines have been placed on mute to prevent any background noise.

Operator: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, please press star 1 again. Thank you. I'd now like to turn the call over to Julia Bader Fernandez, Investor Relations Director. You may begin.

Operator: After the Speakers' remarks, there will be a question and answer session. If you'd like to ask a question. During this time simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question.

Speaker Change: Please press star one again.

Speaker Change: I'd now like to turn the call over to Julia batter Fernandez Investor Relations Director you may begin.

Julia Vater Fernandez: Hello, everyone, and welcome to the VTEX earnings conference call for the quarter ended March 31st, 2024. I'm Julia Barra Fernandez, Investor Relations Director for VTEX. Our senior executives presenting today are Geraldo Thomaz, Jr., founder and co-CEO, and Ricardo Camatas-Sodre, Chief Financial Officer. Additionally, Mariano Gomire de Faria, founder and co-CEO, and Andres Polidoro, Chief Strategy Officer, will be available during today's Q&A session.

Speaker Change: Hello, everyone and welcome to the <unk> earnings Conference call for the quarter ended March 31st then to 24, and Julia matter Fernandez Investor Relations director for <unk>, Our senior executives' presenting today are get out of the Thomas Junior Thunder ankle CEO and he got to look at my Best Saturday Chief Financial Officer. Additionally.

Julia Vater Fernandez: But do you know what I mean, any thought he our founder and co CEO and Chief strategy Officer will give a level during today's Q&A session.

Julia Vater Fernandez: I would like to remind you that management may make forward-looking statements related to such matters as continued growth prospects for the company, industry trends, and product and technology initiatives. These statements are based on currently available information and our current assumptions, expectations, and projections about future events. While we believe that our assumptions, expectations, and projections are reasonable in view of the currently available information, you are cautioned not to place undue reliance on them. Certain risks and uncertainties are described under the risk factors and forward-looking statement sections of BTEX Form 20-F for the year ended December 31, 2023, and other BTEX filings with the U.S. Securities and Exchange Commission, which are available on our investor relations website.

Julia Vater Fernandez: I would like to remind you that management may make forward looking statements related to such matters as continued growth prospects for the company industry trends and product and technology initiatives. These statements are based on currently available information and our current assumptions expectations and projections about future events, while we believe that our assumptions expectation.

Julia Vater Fernandez: And protections are reasonable in view of the Gordon's double 11 information you're cautioned not to place undue reliance on these forward looking statements.

Julia Vater Fernandez: Certain risk uncertainties are described under risk factors and forward looking statements sections of <unk> form 20-F for the year ended December 31st Sunday 23, another B techs filings within the U S Securities and Exchange Commission, which are available in our investor relation website. Finally, I would like to remind you that during the course of this call.

Julia Vater Fernandez: Finally, I would like to remind you that during the course of this conference call, we may discuss some non-GAAP measures. A reconciliation of those measures to the nearest comparable gap measures can be found in our first quarter 2024 earnings press release, available on our investor relations website. Now, I will turn the call over to Geraldo. Geraldo, the floor is yours.

Geraldo: In principle, we may discuss some non-GAAP measures.

Geraldo: A reconciliation of those measures to the nearest comparable GAAP measures can be found in our first quarter 200 before earnings press release available on our Investor Relations website now, let me turn the call over to get out of that out of the floor is yours.

Geraldo do Carmo Thomaz: Thank you, Julia. Welcome, everyone, and thanks for joining our first quarter 2024 Ernest Conference Call. As we step into 2024, despite macroeconomic uncertainties, our GM view continues to outperform the market, growing 22% year over year. Slightly above that, our revenue grew 25% year over year in the first quarter of 2024. We remain encouraged by new contract signatures and the operational leverage of our business model, resulting in significant operating margin expense. In today's retail landscape, seamless integration of software solutions, content creators, and suppliers within an efficient architecture is imperative for low maintenance costs and rapid revenue generation.

Geraldo: Thank you Juliet welcome everyone and thanks for joining our first quarter 2024 earnings conference call.

Geraldo do Carmo Thomaz: As we step into 2024.

Geraldo do Carmo Thomaz: Macroeconomics uncertainties, our Gms you continue to outperform the market growing 22% year over year.

Geraldo do Carmo Thomaz: Slightly above that our revenue grew 25% year over year in the first quarter of 2024.

Geraldo do Carmo Thomaz: We remain encouraged by new contract signatures and the operational leverage of our business model, resulting in significant operating margin expansion.

Geraldo do Carmo Thomaz: In today's retail landscape seamless integration of software solutions content creators and suppliers within an efficient architecture is imperative for low maintenance costs and rapid revenue generation.

Geraldo do Carmo Thomaz: Commerce has evolved into an ecosystem-driven play, and VTAC is at the forefront of connectivity. With an extensive network comprising over 1,000 system integrators and independent software vendors and over 6,000 ZTEX-IO extensions by third parties, we deliver comprehensive solutions with remarkable speed and efficiency. But our ecosystem extends beyond that.

Geraldo do Carmo Thomaz: <unk> has evolved into a ecosystem driven play and <unk> is at the forefront of connectivity.

Geraldo do Carmo Thomaz: With an extensive network comprising over a thousand system integrators, and independent software vendors and those 6000 feet tactile extensions.

Geraldo do Carmo Thomaz: We deliver comprehensive solutions with remarkable speed and efficiency.

Geraldo do Carmo Thomaz: Our ecosystem extends beyond that our customers can easily become marketplaces and connect external marketplaces sales Rep also play a crucial role in the consumer journey.

Geraldo do Carmo Thomaz: Our customers can easily become marketplaces and connect to external marketplaces. Sales reps also play a crucial role in the consumer journey, and we're investing in connecting them across all channels. Additionally, this year, we're strengthening connections through data, leveraging AI to extract valuable insights. We envision VTACs as a source of truth for sales attribution data, which is vital for developing AI models in commerce.

Geraldo do Carmo Thomaz: And we're investing in connected them across all channels.

Geraldo do Carmo Thomaz: Additionally, do you see that with strengthening connections for data leveraging AI to extract valuable insights.

Geraldo do Carmo Thomaz: <unk> as the source of truth for students attribution data, which is vital.

Speaker Change: Hello <unk>.

Geraldo do Carmo Thomaz: Mothers in Congress.

Geraldo do Carmo Thomaz: At Vitax, we are delivering significant year-over-year operating margin increases while also launching products that reshape commerce for IT and business teams, driving sustainable growth with compelling ROI. Introducing new revenue streams paves the way for our long-term expansion while enhancing operational efficiency and margin. We're excited about ZTEC's future, focusing on growth, margin optimization, and customer success. With positive feedback from customers and industry experts, we affirm our position as the global leader in connected cooperation. We are leveraging these strengths to drive significant sales momentum.

Geraldo do Carmo Thomaz: At <unk>, we are delivering significant year over year operating margin increases while also launching products that reshape commerce for it and business teams driving sustainable growth with compelling ROI.

Geraldo do Carmo Thomaz: Reducing new revenue streams paves the way for our long term expansion, while enhancing operational efficiency and margins were excited about <unk> future focusing on gross margin optimization and customer success.

Geraldo do Carmo Thomaz: Feedback from customers and industry experts reaffirms our position as the global leader in connected Congress, we're leveraging these strengths to drive significant sales momentum.

Geraldo do Carmo Thomaz: Our recent expansion into Germany underscores our commitment to global growth while sustaining sales momentum in Brazil highlights our long-term growth potential. In the first quarter of 2024, we celebrated successful go-lives of new customers, including CUNY Hair Cosmetics, manufacturing in Belgium, the Netherlands, and France. Arado, Cruzeiro do Sul, Pet Yard in Brazil, Tres Montes in Chile, OVI in Germany, Pagina de Ales Shop in Italy, KFC in Romania, and H-Mart in the US.

Geraldo do Carmo Thomaz: Recent expansion to Germany, underscore our commitment to global growth, while sustaining sales momentum in Brazil highlights our long term growth potential.

Geraldo do Carmo Thomaz: In the first quarter of 'twenty 'twenty four we celebrated successful go lives of new customers, including CUNY health cosmetics manufacturing, Belgium, the Netherlands, and France at Abu cricket into stool backyard in Brazil today small tests in Chile.

Geraldo do Carmo Thomaz: In Germany.

Geraldo do Carmo Thomaz: <unk> gel is shocked immediately KFC in Romania, It H March in the U S.

Geraldo do Carmo Thomaz: For the more, we have strengthened our relationship with existing partners, such as Grupo Soma, who added a new store in Chile, expanding its presence to more than 10 stores across Latin America and the U.S. He knows the group who added their B2B store in Brazil, now operating both B2B and B2C models across two countries in Latin America. Hugo Boss added a new store in Colombia and Peru, increasing its footprint to four stores across Latin America.

Geraldo do Carmo Thomaz: Furthermore, we have strengthened our relationship with existing customers such as Grupo Soma, who added a new store in Chile, expanding its presence to more than 10 stores across Latin America, and the U S T.

Geraldo do Carmo Thomaz: <unk> group, who added a bit to be stored in Brazil, now operating both bto b and beaches Jeep models across two countries in Latam.

Geraldo do Carmo Thomaz: We'll go bots, who added a new store in Cologne days, Peru, increasing its footprint to four stores across Latin America.

Geraldo do Carmo Thomaz: And Nike, who added a new store in Colombia, extending its reach to three countries in Latin America. This year, Vitex achieved a significant milestone in its journey of growth and innovation by successfully launching the OBI operation in Germany. These moves mark a pivotal moment in our commitment to the European market. Talking about milestones, I would like to draw attention to a significant event in the first quarter of 2024 that happened right after Enaria.

Geraldo do Carmo Thomaz: Key words did a new store in Colombia, extending its reach to treat countries in Latin America.

Geraldo do Carmo Thomaz: If you detected that seems correct milestone in its journey of growth and innovation by successfully launching the OTI operation in Germany. This move marks of Baidu wallet in our commitment to the European markets.

Geraldo do Carmo Thomaz: Our boss milestones I would like to draw attention to a significant event in the first quarter of 2024 that happened right. After.

Geraldo do Carmo Thomaz: Vitex Connect Live New York City made a resounding debut as the first US-based event of its kind, drawing over 1,000 influential in-person attendees eager to immerse themselves in the latest trends and strategies shaping digital content. The event was a hub of inspiration and networking opportunities for commerce leaders seeking to navigate the evolving retail landscape. In addition to featuring the renowned entrepreneur and Basketball Hall of Fame Magic Johnson, our event included a panel discussion with her.

Geraldo do Carmo Thomaz: Yes.

Geraldo do Carmo Thomaz: Texaco next lives neuro TV, maybe the resounding debuted as the first U S based effector count drawing over a thousand installation will improve selecting DS <unk> three months themselves in the latest trends and strategy shaping digital cockpits.

Geraldo do Carmo Thomaz: The event was the club of inspiration and network opportunities for college leaders seeking to navigate the evolving retail landscape. In addition to featuring <unk> and to a printer and basketball Hall of Fame Magic Johnson our events included a 10.

Geraldo do Carmo Thomaz: Discussion with the shared insights into their decision to partner with feed checks highlighting how this choice enabled them to significantly decrease the total cost of ownership transitioning from a TCE of high single digits. After GM V too low.

Geraldo do Carmo Thomaz: They shared insights into their decision to partner with Vitex, highlighting how this choice enabled them to significantly decrease their total cost of ownership, transitioning from a TCO of high single digits of their GMV to low single digits with Vitex. The event highlighted the significance of equipping retailers and brands with the essential tools in today's high interest rate environment. As global interest rates remain high, businesses must optimize organic sales channels and enhance the market.

Geraldo do Carmo Thomaz: Single digit with the tax.

Geraldo do Carmo Thomaz: The event highlighted the significance of equipping retailers and brands with essential tools in today's high interest rates and vitamins as its global interest rates remained high business with optimizer can sales channels and enhance margins the <unk> demonstrated that.

Geraldo do Carmo Thomaz: The event demonstrated that Vitex strikes the balance between flexibility and low-maintenance commerce technology, enabling its customers to stay ahead in the dynamic world of retail. Additionally, as mentioned, we started 2024 with strong momentum with industry analysts and firms recognizing Vitex as top performers. In January, we were recognized as the customer's choice and got the voice of the customers for digital commerce. By February, we also earned the top spot in the IDC Marketplace Worldwide B2C Digital Commerce Platform for Mid-Market Growth Vendor Assessment Study. With this strong start, 2024 is shaping up to be an even more remarkable year for me.

Geraldo do Carmo Thomaz: Detect strikes the balance between flexibility and low maintenance Congress technology, enabling its customers to stay ahead in the dynamic world of retail.

Geraldo do Carmo Thomaz: Additionally, as mentioned, we started 2024 with strong momentum with industry analyst.

Geraldo do Carmo Thomaz: Firms recognize Texas top performer in January we were recognized as the customer's choice and got the voice of the customers for digital Commerce by February. We also earned the top spot in the IDC marketplace worldwide did you see digital commerce.

Geraldo do Carmo Thomaz: Platform for mid market growth vendor assessment study.

Geraldo do Carmo Thomaz: With the strong start 2024 is shaping to be unusual more remarkable year for iridex.

Geraldo do Carmo Thomaz: Now, let's focus on what matters most, our customers. Here are just a few customer success stories that exemplify our platform capabilities and the remarkable outcomes they achieve. OBI, one of our new live customers this quarter is a titan in Europe's home improvement sector, with more than 640 stores scattered across 10 European countries, with headquarters in Germany. By migrating away from the previous legacy platform and choosing Vitex over the others, ODI can now leverage the Vitex composable and complete commerce platform.

Geraldo do Carmo Thomaz: Now, let's focus on what matters most our customers.

Geraldo do Carmo Thomaz: Just a few customer success stories that exemplify our platform capabilities and good remarkable outcomes they achieved.

Geraldo do Carmo Thomaz: Over by one of our new live customers. This quarter is that tightening europes homing proven sector with more than 640 stores scattered across 10 European countries with headquarters in Germany.

Geraldo do Carmo Thomaz: By migrating away from the <unk> legacy plateau for <unk> overdue authors ODI can now leverage <unk> composer, but when complete commerce platform marketplace capabilities.

Geraldo do Carmo Thomaz: Marketplace Capabilities and Unparalleled Automation Process. OBI, seamlessly integrated into its e-commerce operation, 349 Germany-located physical stores and third-party sellers into a unified transaction platform, expanding product offerings and providing customers with a seamless shopping experience across various delivery and pickup options.

Geraldo do Carmo Thomaz: Total cloud automation processes.

Geraldo do Carmo Thomaz: ODI seamlessly integrated to see Congress operation 349, Germany, located physical stores and third party sellers into a unified transactions plus flow expanding product offerings, and providing customers with a seamless shopping experience across various.

Geraldo do Carmo Thomaz: Delivery and pickup options.

Geraldo do Carmo Thomaz: With integrated physical stores nationwide, customers can now pick up online orders within just two hours, showcasing the platform's efficiency and effectiveness and meeting consumer needs. Since migrating to VTechs, OBI has experienced significant enhancements, including unified franchise management, smooth ramp-up of platform traffic, improved front-end metrics, and increased agility in the development process. This collaboration not only enhances OBI's current operation but also opens doors to a world of future

Geraldo do Carmo Thomaz: <unk> integrated physical stores national wide customers can now pick up online orders within.

Geraldo do Carmo Thomaz: Two hours showcasing the plateau from efficiency and effectiveness in meeting consumer needs.

Geraldo do Carmo Thomaz: Since migrating to be text OPI has experienced significant enhancements, including unified franchise management smooth ramp up of data from traffic.

Geraldo do Carmo Thomaz: Prove it trotted metrics and increased agility and development processes.

Geraldo do Carmo Thomaz: This collaboration not only enhances opi's current operation, but also opens the door to a world of future possibilities.

Geraldo do Carmo Thomaz: It's a testament to Vitek's unwavering commitment to driving profitable growth and fostering innovation for enterprise brands globally. Chloe, the most relevant leather goods brand in Mexico, partnered with Vitex to lead its omni-channel strategies and its international expansion. Among its standout features, Personal Shopper emerges as a game-changer, offering customized shopping experiences.

Geraldo do Carmo Thomaz: Testament to detect unwavering commitment to driving profitable growth and fostering innovation for enterprise brands globally.

Geraldo do Carmo Thomaz: Clearly the most relevant leather goods brand in Mexico partner with detects should lead through Omnichannel strategies and its international expansion.

Geraldo do Carmo Thomaz: That's composed of a platform helped them reduce implementation costs and streamline processes are more it's 10 adult featured personal shopper that emerged as the game changer, often customized shopping experiences with interactive mobility solutions.

Geraldo do Carmo Thomaz: With interactive, innovative solutions, Chloé achieved remarkable results, a 14% increase in digital sales by the end of 2023, standout features like personal shoppers, reduced returns, and improved decision-making while enhancing checkout performance, and diverse permanent methods boosted offline sales. The e-commerce success, evidenced by a 60.5% conversion rate increase and a 12.5% growth in the average order value, underscores the impactful collaboration between Vitex and Ch Future plans include adding cross-border functionality for expansion into new markets and personalizing the experiences through live shopping, demonstrating Clouet's commitment to continual growth and innovation. Cogate's partnership with ITSEX is the embodiment of innovation in digital commerce. Recognizing a gap in the customer experience between dental professionals and their customers.

Geraldo do Carmo Thomaz: We achieved remarkable results a 14% increase in digital sales by the end of 2023.

Geraldo do Carmo Thomaz: Standout features like personal shopper reduced returns and improved decision, making while enhancing shortcut performance and diverse Goodman methods boosted offline sales.

Geraldo do Carmo Thomaz: <unk> success.

Geraldo do Carmo Thomaz: Bye.

Geraldo do Carmo Thomaz: Two 5% conversion rate increase and a 12, 5% growth in the average order value underscored impactful collaborations between <unk> and deploy it.

Geraldo do Carmo Thomaz: Future plans include adding the cross border scenario two for expansion into new markets and personalize their experiences food life shop, demonstrating Kool AIDS commitment to contribute to growth and innovation.

Geraldo do Carmo Thomaz: Colgate partnership repeat Jack's is being volume into innovation and digital Congress recognize me a gap in the customer experience between dental professionals and their customers, who gave you got to work by building a unique b to b to C market basic commerce month.

Geraldo do Carmo Thomaz: Colgate got to work by building a unique B2B2C marketplace e-commerce model, with a network of consultants covering diverse regions. The scalability of this digital transformation was vital. Colgate saw a platform accommodating complex B2B requirements, including a specialized logging system for certified dentists and seamless integration with partners. Leveraging VTAC's native capability, Colgate developed a pioneering marketplace for dentists, offering integrated distributor products and fostering sales growth without logistical expense. Streamlining Implementation and Reducing Cost

Geraldo do Carmo Thomaz: With a network of consultants covering diverse region.

Geraldo do Carmo Thomaz: DVT of these digital transformation was vital.

Geraldo do Carmo Thomaz: Colgate soft at Plaza accommodating co black speech, you'll be requirements, including a specialized blocking system for certified dentist and seamless integration with partners.

Geraldo do Carmo Thomaz: Leveraging the tax native capability Colgate developed a pioneering marketplace for dentist is offering integrated tubular products and fostering sales growth without logistical expenses streamlining implementation and reducing costs.

Geraldo do Carmo Thomaz: Strategic enhancements like cashback promotions and the loyalty program further augmented its sales. Colgate started its operation with Vitex in Brazil. And in the fourth quarter of 2023, it added two B2B sites in the US, PCA Scheme and Colgate Profession, further leveraging our fully composable and marketplace-enabled architecture. DMACC, a grocery distributor in Chile, catering to over 24,000 customers across eight regions, partnered with Vitek to revolutionize their B2B operations. Embracing VTAC's Innovative Solutions, DMACC embarked on a digital journey to tap into strategic growth opportunities by expanding its sales channel.

Geraldo do Carmo Thomaz: These strategic enhancements like cashback promotions and the loyalty program further augmented sales.

Geraldo do Carmo Thomaz: <unk> started its operation will be detecting good view and in the fourth quarter of 2023. It added <unk> sites in the U S <unk> and co giving profession.

Geraldo do Carmo Thomaz: Leveraging off fully compose the book and marketplace enabled architecture.

Geraldo do Carmo Thomaz: Do match, our grocery distributor in Chile catering to over 24000 customers across eight regions Barton, we detached to been able to show nice therapy to be operations.

Geraldo do Carmo Thomaz: And Brady seen detective innovative solutions do mock embarking to all the digital journey to tap into strategic growth opportunities by expanding its sales channels with the launch of the <unk> B websites Seamark established a 24 staff and online store.

Geraldo do Carmo Thomaz: With the launch of the B2B website, DMACC established 24x7 online stores, ensuring seamless access to their products for customers around the clock, utilizing B2B Suite as the cornerstone of their architecture. DeMarc implemented a closed website model, offering product prices exclusively upon customers' login, while leveraging essential tools such as checkout, catalog, and OMS. With Vitek's guidance, DEMARC streamlined its pricing strategy, condensing its price list from 600 to 60 tiers based on location and customer segment.

Geraldo do Carmo Thomaz: Ensuring seamless access to their products for customers around the clock.

Geraldo do Carmo Thomaz: Utilizing <unk> suite as the cornerstone of their architecture demark implemented the closest website model offering product prices exclusively upon customers logging, while leveraging essential tools, such as checkout catalog and Oems.

Geraldo do Carmo Thomaz: With <unk> guidance do Mark is streamlined its pricing strategy called dancing. Its stress leads from 600 to 610 years based on location and customer segment.

Geraldo do Carmo Thomaz: Since the platform launched within a swift four-month implementation period, DMACC has witnessed remarkable growth, experienced a 10x increase in GMV in order, doubling their commercial rates, and achieving a 4% boost in profitability compared to traditional channels alone. Hearst, the leading global diversified media information and service company, chose Vitex for its extensive native capabilities, adaptable move site architecture, and Vitex I.O. development platform, enabling the integration of custom features. Leveraging VTEX, Hertz established a marketplace supporting multi-vendor business models, thereby seamlessly enhancing the customer experience across its publication and shoppable interface, facilitating the easy purchase of featured products.

Geraldo do Carmo Thomaz: Since the platform's launch with Dean.

Geraldo do Carmo Thomaz: Switch.

Geraldo do Carmo Thomaz: Implementation period to Mac witnessed its remarkable growth experiences 10, Max increase in GM, Vietnam orders doubling the Congress show rates and achieving a four percentage point boost in profitability compared to traditional channels alone.

Geraldo do Carmo Thomaz: First the leading global diversified media information and service company chose <unk> for its extensive native capabilities adaptable mood site architecture and get tax diode development blood to flow, enabling the integration of custom features.

Geraldo do Carmo Thomaz: Averaging vjax Hertz established a marketplace supporting mucci Vandal business models, thereby seamlessly enhancing the customer experience across its publication and shuffle interfaces.

Geraldo do Carmo Thomaz: But it is taking the purchase of featured products.

Geraldo do Carmo Thomaz: With VTech's out-of-the-box features and flexible APIs, Hearst swiftly launched its platform and integrated new business models into the digital economy. Furthermore, HRST serves as the flagship customer piloting Vitek's data pipeline and Vitek's fast checkout, currently undergoing A-B testing for the men's health website as the primary checkout experience.

Geraldo do Carmo Thomaz: We seek tax out of the box features insectivore api's cruise ships to be launched at Spotify and inter attributed to leverage new business models in the digital economy.

Geraldo do Carmo Thomaz: The more first serves as the flagship customers piloting detect data pipeline and detect fast checkout currently undergoing a b testing for the men's health website as the primary checkup experience.

Geraldo do Carmo Thomaz: Interfood, a leading Brazilian beverage importing company with a global presence of over 100 locations, has been a satisfied Vitax B2C customer since 2020. Recently, they chose Vitax also to power their B2B operations, unlocking a new realm of opportunity. Leveraging VTAC's B2B Switch Tool, InterFood seamlessly integrated APIs to create microservices, streamlining customer registrations, and credit control processes for enhancing organizational management. Additionally, with Vitek's IO apps, the Vitek team tailored tax requirements to meet Interfood's needs precisely, exemplifying Vitek's dedication to meeting and exceeding customer expectations.

Geraldo do Carmo Thomaz: Their food, a leading Brazilian beverage importing companies with the global presence itself over a 100 locations.

Geraldo do Carmo Thomaz: D satisfies gtech's digit seat customers since 2020 recently they chose <unk> also to power. The Beechwood re operations are locking a new realm of opportunities.

Geraldo do Carmo Thomaz: Leveraging these tax <unk> switched to into food seamlessly integrated API to create micro services streamline customers registrations and credit control processes for enhancing organizational management.

Geraldo do Carmo Thomaz: Additionally, we see textile youll apps, the vertex team tend to tax requirements to Matt equal food needs precisely and simplify the tax dedication to meeting and exceeding customer expectations.

Geraldo do Carmo Thomaz: KFC, a quick service restaurant giant, selected Vitex in Romania to power the B2C operation. Seamlessly aligning with VTech's out-of-the-box functionalities, KFC swiftly launched their website, and the mobile web, for both iOS and Android, all from a single code base. I am proud to say that the VITACS team was able to adapt the trade tailored ordering and payment methods to meet KFC's specific requirements and be ready to launch the products in only four months.

Geraldo do Carmo Thomaz: <unk> seen a quick service restaurant giant selected <unk> in Romania to power the BGC operations senior.

Geraldo do Carmo Thomaz: Seamlessly aligning with <unk> out of the box functionality <unk>.

Geraldo do Carmo Thomaz: Switched and launched the website and mobile App for both iOS and Android all from a single code base.

Geraldo do Carmo Thomaz: I am proud to say that Gtx team was able to adapt and tailor ordering and payment methods to meet KFC specifics violent and be ready to launch the product in only four months.

Geraldo do Carmo Thomaz: Meso, a leading Brazilian dermal cosmetics chain expanding in nine states, partnered with Vitex to develop their B2C and B2B blotting. The Swift launched two stores, Mezzo Cosmetics and Mezzo Professionals, leveraging seamless connectivity with physical stores and a unified data source for streamlined operations. Each franchisee account serves as a wide-label seller, representing individual physical stores and ensuring optimal inventory management across territory. Remarkably, the project was completed within a mere three months.

Geraldo do Carmo Thomaz: Meso, a leading Brazilian downward cosmetics chain expanding nine states partnered with <unk> to develop there did you see and be two big platforms. The Swift launched two stores meso cosmetics and meso professionals leveraging seamless connectivity with.

Geraldo do Carmo Thomaz: Physical stores and a unified data source for streamlined operations each franchise via Kal serves as a white label seller, representing induced <unk> physical stores and ensuring optimal inventory management across territories. We.

Geraldo do Carmo Thomaz: Marketplace. The project was completed within three months.

Geraldo do Carmo Thomaz: New Balance, the global brand catering to sneakers enthusiasts, migrated to VITAS and doubled their website conversion rates in Brazil. With their previous e-commerce platform, New Balance struggled to deliver innovative experiences limited to the basic sales journey due to high development costs and resource allocation. The text-composable platform, plug-and-play functionalities, and extensive partners' ecosystem caught New Balance's attention. Once manual and labor-intensive, integration of pricing catalogs and XML automation became seamless with Vitex API integration, empowering their teams to manage promotion and discounts autonomously.

Geraldo do Carmo Thomaz: New balance the global brands catering these new castings to justice.

Geraldo do Carmo Thomaz: <unk> and doubled their website conversion rates in Brazil.

Geraldo do Carmo Thomaz: With their previous ecommerce platform, new balanced struggled to deliver innovative experiences limited to basic sales, Germany due to the high development costs and resource allocation constraints.

Geraldo do Carmo Thomaz: <unk> Plaza for plug and play functionalities and extensive partner ecosystem caught new spot balances attention.

Geraldo do Carmo Thomaz: Manual and labor intensive integration of pricing catalogues and extra mill donation became seamless with detects API integrations.

Geraldo do Carmo Thomaz: Empowering the teams to manage promotion and discounts autonomously.

Geraldo do Carmo Thomaz: The migration to Vitex facilitated rapid results for new buyers and e-commerce, which led to a significant increase in product page visits, double conversions, and revenue growth within a month post-migration. Before handing over to Ricardo, I want to revisit some exciting announcements from the tech stage. This year's event boasted over 20,000 attendees, highlighting the impressive reach of the GITECS ecosystem.

Geraldo do Carmo Thomaz: The migration to detect facilitated rapid results for new balances at Congress.

Geraldo do Carmo Thomaz: Which led to a significant increase in profit based visits.

Geraldo do Carmo Thomaz: Conversions and revenue growth within a more was post migration.

Geraldo do Carmo Thomaz: Before handing over to Ricardo I want to revisit some exciting announcements strong detects date.

Geraldo do Carmo Thomaz: Some of the announcements include the Fresh Store, empowering brands with agile front-end solutions for tailored store experiences, now available for both B2B and B2C use cases. The TechEd Network, revolutionizing digital advertising through AI-driven targeting and optimization. Vitek Data Pipeline, offering specialized APIs for seamless data retrieval and sharing.

Geraldo do Carmo Thomaz: This year's event boosted over 20000, letting DS highlighting the impressive reach of the <unk> ecosystem.

Geraldo do Carmo Thomaz: The announcements included first store in powering brands with agile front end solutions for tailored store experiences now available for both <unk> and featured C used cases.

Geraldo do Carmo Thomaz: AD network revolutionizing digital advertising through AI, driven targeting in auctions the tech data pipeline offering specialized Apis for seamless data retrieval and sharing.

Geraldo do Carmo Thomaz: Vitek Shute, Safeguarding Against Security Threats and Preserving Revenue and Trust, along with AI-powered features across the search engine, like shopping and pick-and-pack operations, optimizing user experiences, and boosting conversion rates, and market-based enhancements for streamlined operations and accelerated time-to-life. This represents just a handful of the training advancements we've reviewed on our innovation and growth journey here at VT. We're reshaping the commerce landscape with pioneering products specifically designed for enterprise customers and their IT and business teams.

Geraldo do Carmo Thomaz: The Texas shoot safeguarding against security threats and preserving revenue amtrust.

Geraldo do Carmo Thomaz: Along with AI powered features across search search engine like shopping and pick and pack operations optimizing user experiences and boosting conversion rates and marketplace enhancements for streamlined operations and accelerated time to revenue.

Geraldo do Carmo Thomaz: This represents just a handful of the treating advancements we've reviewed in now on our innovation and growth journey here at <unk>.

Geraldo do Carmo Thomaz: We're reshaping the covenants landscape with pioneering products specifically designed for enterprise customers in the ITM business teams.

Geraldo do Carmo Thomaz: Our solutions empower IT teams with cutting-edge functionalities, while our intuitive interfaces empower business teams to implement strategy seamlessly. Ultimately, our products are geared towards optimizing end-user retention and attraction, boosting conversion rates, helping our customers optimize their e-commerce platform to amplify their ROI. Moreover, these products will open up new revenue streams for the company. While the short-term impact may not be significant, they could play a role in our long-term growth trajectory.

Geraldo do Carmo Thomaz: Solutions in our.

Geraldo do Carmo Thomaz: <unk> teams to weep, Petchey net functionalities, while on <unk> interface and power businesses teams to implement its strategy seamlessly.

Geraldo do Carmo Thomaz: Ultimately our product side geared towards optimizing and user retention and attraction boosting conversion rates, helping our customers optimize their e-commerce start to flow through one through five ROI.

Geraldo do Carmo Thomaz: Moreover, these products will open up new revenue streams for the tax.

Geraldo do Carmo Thomaz: While the short term impact may not be sticking Scott they could play a role in our long term growth trajectory.

Geraldo do Carmo Thomaz: I'd like to take a moment to express my gratitude to our 1,334 dedicated VITECS employees, whose unwavering dedication and commitment propel us forward as the backbone for connected commons. I'd also like to thank our valued customers, partners, and investors. I will now hand the call over to Ricardo. Thank you, Geraldo. Hi, everyone.

Geraldo do Carmo Thomaz: I'd like to a moment to express my gratitude to our 30 134 dedicated <unk> employees.

Ricardo: Unwavering dedication and commitment propel us forward as the backbone for connected Congress.

Ricardo: I'd like also to thank our valued customers partners and investors.

Geraldo do Carmo Thomaz: I'll now hand, the call over to Ricardo Thank you hit all the high <unk>.

Ricardo Camatta Sodre: Thank you, Geraldo. Hi everyone.

Ricardo Camatta Sodre: I'm pleased to share VTAC's Q1 2024 financial results. As emphasized by Geraldo, our Q1 GMV hit $4.0 billion, marking an year-over-year growth of 22% in U.S. dollars and 20% in FX neutral. This led to a year-over-year revenue growth of 25% in US dollars and 21% on an FX-neutral basis, reaching $52.6 million. Although macroeconomic conditions impacted the same-source sales of existing customers, the first quarter of 2024 witnessed relevant momentum in signatures of new annual contract values.

Ricardo: I am pleased to share <unk> Q1, 2024 financial results as emphasized by Geraldo, Our Q1, GMB hit 4.0 billion, marking a year over year growth of 22% in U S dollars and 20% in FX neutral.

Ricardo Camatta Sodre: This led to a year over year revenue growth of 25% in U S dollars and 21% on an FX neutral basis, reaching $52 $6 million.

Ricardo Camatta Sodre: Although macroeconomic conditions impacted the same store sales of existing customers. The first quarter of 2024 witness relevant momentum E signatures of new annual contract value.

Ricardo Camatta Sodre: That, coupled with significant gross margin improvements and a disciplined operational expenses approach, results in significant operational leverage and an encouraging sign for VTAC's profitable growth trajectory. Double-clicking on our top line, our subscription revenue reached $50.4 million this quarter, up from $39.8 million in the first quarter of 2023, representing a year-over-year increase of 27% in U.S. dollars and 23% in FX neutral, while our services revenue total Now, moving down the P&L, we have some exciting updates.

Ricardo Camatta Sodre: That coupled with significant gross margin improvements and a disciplined operational expenses approach results in significant operational leverage and an encouraging sign for the tax profitable growth trajectory.

Ricardo Camatta Sodre: Double clicking on our topline our subscription revenue reached $54 million this quarter up from $39 $8 million into first quarter of 2023, representing a year over year increase of 27% in U S dollars and 23% in FX neutral, while our services revenue totaled $2.

Ricardo Camatta Sodre: $3 million.

Ricardo Camatta Sodre: We are pleased to announce the positive operational leverage achieved, even with the inherently weaker seasonality observed in all first quarters. This performance instills confidence in our sustainable profitability process. Our non-GAAP subscription gross margin reached 77.2%, a 328 basis points year-over-year improvement compared to the 73.9% margin in the same quarter last year. This margin expansion underscores our team's dedication to enhancing profitability and highlights our ongoing efforts to migrate non-core services to more efficient hosting providers and optimize support costs for operational leverage. While we've made substantial progress, there are still further opportunities for marginal improvements going forward.

Ricardo Camatta Sodre: Now moving down the P&L, we have exciting updates we are pleased to announce the positive operational leverage achieved even with the inherently weaker seasonality observed in our first quarters. This performance <unk> confidence in our sustainable profitability prospects.

Ricardo Camatta Sodre: Our non-GAAP subscription gross margin reached 77, 2% or 328 basis points year over year improvement compared to the 73, 9% margin in the same quarter last year.

Ricardo Camatta Sodre: These margin expansion underscores our team's dedication to enhancing profitability and highlights our ongoing efforts to migrate noncore services to more efficient hosting providers and optimized support costs for operational leverage.

Ricardo Camatta Sodre: While we've made substantial progress there is still Florida opportunities for marginal improvements going forward.

Ricardo Camatta Sodre: Consequently, our non-GAAP gross margin reached 72.4%, representing 641 basis points of improvement year-over-year compared to 65.9% in the first quarter of 2023. Notably, our gross profit increased 37% year-over-year in the first quarter of 2024, reaching $38.1 million. Our non-GAAP total operating expenses reached $35.1 million in the first quarter of 2024, from $33.4 million in the prior quarter and $31.9 million in the same period last year. We remain steadfast in our commitment to controlling expenses and optimizing investment returns. Our expenses have remained notably stable throughout 2023 and the first quarter of 2024, reflecting our ongoing efficiency and enhancement.

Ricardo Camatta Sodre: Consequently, our non-GAAP gross margin reached 72, 4%, representing a 641 basis points improvement year over year compared to 65, 9% in the first quarter of 2023.

Ricardo Camatta Sodre: Notably our gross profit increased 37% year over year in the first quarter of 2020 for reaching $38 $1 million.

Ricardo Camatta Sodre: Our non-GAAP total operating expenses reached $35 $1 billion into first quarter of 2024 from $33 4 million in the prior quarter and $31 9 million in the same period last year.

Ricardo Camatta Sodre: We remain steady fast in our commitment to controlling expenses and optimizing investment returns our expenses have remained notably stable throughout 2023, and the first quarter of 2024, reflecting our ongoing efficiency enhancements R&D and G&A expenses remained relatively stable quarter.

Ricardo Camatta Sodre: R&D and G&A expenses remain relatively stable quarter over quarter, while the increase in sales and marketing is mostly explained by special events such as NRF and the previously mentioned Vitex Connect New York City. As a result, our non-gap operating income improved from a negative 9.7% margin in the same quarter last year to a positive 5.7% margin in the first quarter of 2024. Given that expenses increased only slightly year-over-year, this significant 15 percentage point improvement is driven by our revenue growth with operational leverage and by gross margin improvement.

Ricardo Camatta Sodre: Over quarter wildly increasing sales and marketing is mostly explained by special events, such as <unk> and RF and the previously mentioned <unk> connect New York City.

Ricardo Camatta Sodre: As a result, our non-GAAP operating income improved from a negative nine 7% margin in the same quarter last year to a positive $5 seven margin in the first quarter 2024.

Ricardo Camatta Sodre: Given that expenses increased only slightly year over year. These significant 15 percentage points improvement.

Ricardo Camatta Sodre: Is driven by our revenue growth with operational leverage and by gross margin improvements.

Ricardo Camatta Sodre: These reinforce our dedication to managing our business efficiently, fostering growth responsibly and sustainably, and aiming towards reaching the rule of 40. For the third consecutive quarter and in a seasonally weak quarter, Vitex generated cash. As of the three months ended March 31st, 2024, we had a positive $1.9 million free cash flow compared to a negative $5.0 million free cash flow in the same quarter of the prior year.

Ricardo Camatta Sodre: <unk> reinforces our dedication to managing our business efficiently fostering growth responsibly, and sustainably and aiming towards reaching the rule of 40.

Ricardo Camatta Sodre: For the third consecutive quarter and in a seasonally weak quarter vertex generated cash.

Ricardo Camatta Sodre: As of the three months ended March 31, 2024, we had a positive $1 $9 million free cash flow compared to a negative $2.0 million free cash flow in the same quarter of the prior year.

Ricardo Camatta Sodre: Looking ahead, despite the uncertain macroeconomic conditions, we remain encouraged by our sales momentum and operational leverage. From a revenue perspective, we are currently targeting $54.5 to $56.0 million for the second quarter of 2024, implying a year-over-year growth of 18% on an FX-neutral basis in the middle of the range. For the full year 2024, we continue executing our strategy for profitable growth. Recognizing heightened volatility in Argentina's macro situation, we are targeting FX-neutral year-over-year revenue growth of 16% to 20%, implying a range of $234 million to $243 million based on April's average FX rate.

Ricardo Camatta Sodre: Looking ahead, despite the uncertain macroeconomic conditions, we remain encouraged by our sales momentum and operational leverage.

Ricardo Camatta Sodre: From a revenue perspective, we are currently targeting 54, five to 56 points year $1 billion range for the second quarter 2024, implying a year over year growth of 18% on an FX neutral basis in the middle of the range.

Ricardo Camatta Sodre: For the full year 2024, we continue executing our strategy for profitable growth.

Ricardo Camatta Sodre: <unk> agonizing heightened volatility in Argentina's macro situation, we are targeting FX neutral year over year revenue growth of 16% to 20%, implying a range of $234 million to $243 million based on April average FX rates.

Ricardo Camatta Sodre: Further demonstrating our operational leverage, we are targeting free cash flow and non-gap operating income margins of high single digits. We are excited about the future of Vitax. Our business model has proven its robustness, and now our journey revolves around achieving business growth, expanding margins, and generating cash. We anticipate supporting our customers while extending our value proposition to more brands and retailers to help them reach their financial and operational objectives in a high interest rate environment worldwide.

Ricardo Camatta Sodre: Further demonstrating our operational leverage we are targeting free cash flow and non-GAAP operating income margins of high single digits.

Ricardo Camatta Sodre: We are excited about the future of beat tax our business model has proven its robustness and now our journey revolves around achieving business growth expanding margins and generating cash we anticipate in supporting our customers, while extending our value proposition to more brands and retailers to help them.

Ricardo Camatta Sodre: Each day, our financial and operational objectives in a high interest rate environment worldwide.

Ricardo Camatta Sodre: Our journey so far has been filled with rewarding moments, and we are encouraged about all that lies ahead to solidify our position as a global backbone for connected commerce. With that, let's open it up to questions now.

Ricardo Camatta Sodre: Our journey, so far has been filled with rewarding moments and we are encouraged about all that lies ahead to solve it by our position as a global backbone for connected commerce.

Operator: Thank you. We'll now begin the question and answer session. If you would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again. If you are called upon to ask your question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Your first question comes from the line of Thiago Kaposkis from Banco Itao BBA. Your line is open.

Ricardo Camatta Sodre: With that let's open it up for questions now.

Operator: You.

Operator: Thank you we will now begin the question and answer session. If you would like to ask a question. Please press star one on your telephone keypad to raise your hand and joined the queue. If you would like to withdraw your question simply press Star one again if.

Operator: If you are called upon to ask your question and our listening via loud speaker on your device. Please pick up your handset and ensure that your phone is not on mute when asking a question.

Thiago Kaposkis: Your first question comes from the line of Thiago <unk> from Banco <unk> BBA. Your line is open.

Thiago Kaposkis: Hi everyone. Can you guys hear me here?

Thiago Kaposkis: Hi, everyone can you guys hear me here.

Unknown Executive: Yep, we can hear you. Great, great.

Thiago Kaposkis: Yes, we can hear you great great. Thanks, Thanks, a lot for further questions. So I have so I think the first one regarding.

Thiago Kaposkis: Great, great. So, thanks a lot for the questions. So, I think the first one regarding the full-year guidance, right? I mean, the nominal numbers are the same, right? But the effects-neutral growth is lower than the previous guide, right? You guys mentioned Argentina.

Thiago Kaposkis: The full year guidance right I mean, the nominal nominal numbers are the same right but.

Thiago Kaposkis: The FX neutral growth.

Speaker Change: It is lower than the previous guide Rachel.

Thiago Kaposkis: As mentioned, Argentina is there anything else from terms of the business that is the only.

Thiago Kaposkis: Is there anything else in terms of the business that is going different or doing different than your previous expectations? And if you guys could give us some color also in Argentina, if it's just effects-related or how the business is there in terms of overall strength, I know that this was a concern back in Q4. And the other question is about the AI products that you are providing. I mean, there's a lot in the pipeline.

Thiago Kaposkis: Different or doing different Daniel your previous expectations and if you could guide if you guys could lever some color also in Argentina.

Thiago Kaposkis: FX related or how the business is there in terms of.

Thiago Kaposkis: Overall training I know that this was a concern.

Thiago Kaposkis: Vaccine that till Q4.

Thiago Kaposkis: And the other question is about the DDI products that you are providing there is a lot in the pipeline I think there was.

Thiago Kaposkis: I think there was a shareholder letter last quarter. So, if you guys could comment a little bit more on the roadmap that you have and how you think this could actually enhance your strategy or future opportunities that could come from your strategy there, thank you.

Thiago Kaposkis: Shareholder ladder to last quarter. So if you guys could comment a little bit more on the roadmap that you have and how you think this could actually enhance your strategy or future opportunities that could come from from your strategy. There. Thank you.

Ricardo Camatta Sodre: Great. Hi Thiago, Ricardo Sodre here. I'm happy to take the first two questions on the full year guidance for Argentina, and then I'll pass it over to Geraldo to talk about AI. So on the guidance for the full year, we are maintaining our annual guidance in dollar terms, as you mentioned. This is supported by steady and robust performance observed in key markets such as Brazil, Colombia, Mexico, the U.S., and Europe. And although consumption in real terms is being severely impacted in Argentina, which impacted our FX neutral guidance, given that there hasn't been any significant change in the FX rates in Argentina over the past couple months, that also led us to maintain our revenue guidance in U.S. dollars for the full year.

Speaker Change: Great Hi, juggle he got it right here happy to take the first two questions on the full year guidance in Argentina, and then I'll pass it over to Gerald to talk about AI.

Ricardo Camatta Sodre: So on the on the guidance for the full year, we are maintaining our annual guidance in dollar term designation.

Ricardo Camatta Sodre: D G supported by steady and robust performance observed in key markets, such as Brazil, Colombia, Mexico, The U S and Europe.

Ricardo Camatta Sodre: And although consumption in real terms is be severely impacted in Argentina.

Ricardo Camatta Sodre: Which impacted our FX neutral guidance given that there hasn't been any significant change in the FX rates in Argentina over the past couple of months that also led us to maintain our revenue guidance in U S dollars for the full year.

Ricardo Camatta Sodre: And it's important to recognize a certain level of risk in our guidance, considering the volatility associated with the situation in Argentina, especially in Q2, given, one, their current macro situation and consumption level, and two, their most relevant e-commerce event of the year, called Hot Sales, that will happen next week in the midst of this uncertain environment that they're going through. Now, going back to things that are under our control, looking forward, we are encouraged by our meaningful new contract sales momentum.

Geraldo: And it's important to recognize a certain level of risk in our guidance considering the volatility associated with the situation in Argentina.

Ricardo Camatta Sodre: Especially in Q2 given.

Ricardo Camatta Sodre: One there are current macro situation in consumption level in June.

Ricardo Camatta Sodre: Most relevant e-commerce event of the year called Hot sales that will happen next week in the midst of these uncertain environment that theyre going through.

Ricardo Camatta Sodre: Now going back to things that are under our control.

Ricardo Camatta Sodre: Looking forward, we are encouraged by our meaningful new contracts sales momentum and on the operation operating margin front.

Ricardo Camatta Sodre: And on the operating margin front, and encouraged by our Q1 achievements, we have also adjusted our full-year operating income and free cash flow margin guidance, raising our forecast from mid to high single digits that we mentioned last quarter to high single digits that we gave this quarter. These adjustments reflect our unwavering confidence in our ability to manage and improve our financial performance throughout the year.

Ricardo Camatta Sodre: And encouraged by our Q1 achievements. We have also adjusted our full year operating income and free cash flow margins guidance, raising our forecast for a mid to high single digits that we mentioned last quarter to high single digits that we.

Ricardo Camatta Sodre: Gave this quarter.

Ricardo Camatta Sodre: So these adjustments reflects our unwavering confidence in our ability to navigate and improve our financial performance.

Ricardo Camatta Sodre: Throughout the year.

Ricardo Camatta Sodre: And then just double-clicking on Argentina, the macroeconomic situation in Argentina is challenging. While FX rates have remained stable over the past few months, this stability has come at a cost of a significant economic slowdown. Even though this slowdown was by design to control inflation, the extent of the decline in consumption has been severe.

Ricardo Camatta Sodre: And then just double clicking on Argentina.

Ricardo Camatta Sodre: The macro economic situation in Argentina is challenging.

Ricardo Camatta Sodre: While FX rates have remained stable over the past two months does this stability has come at a cost of significant economic slowdown.

Ricardo Camatta Sodre: Even though the slowdown was by design to control inflation the extend of the declining consumption has been severe.

Ricardo Camatta Sodre: And predicting the trajectory of these environment is difficult as you can imagine and it remains beyond our control.

Ricardo Camatta Sodre: And predicting the trajectory of this environment is difficult, as you can imagine, and it remains beyond our control. So with that said, our performance in Argentina, although weak, stands out as significantly better than the overall e-commerce market and other e-commerce reporting companies, largely due to the resiliency of our customers. For instance, if we look at Q1 performance on a year-over-year basis, our GMV increased above inflation in local currency and was down only single digits in U.S. dollars.

Ricardo Camatta Sodre: So with that said our performance in Argentina, although weeks he stands out as significantly better than the overall e-commerce market and other e-commerce reporting companies largely due to the resiliency of our customers for instance, if we look at Q1 performance on a year over year basis our.

Ricardo Camatta Sodre: <unk> increased above inflation in local currency and was down only single digits in U S dollars.

Ricardo Camatta Sodre: Now, nonetheless, it's important to acknowledge the high level of volatility in this situation and that the situation may get worse before it gets better. And then, finally, it's important to point out that Argentina's performance was the most relevant driver responsible for our Q1 revenue being closer to the bottom of the guidance and also the most relevant driver responsible for us, you know, reviewing down our FX-neutral annual revenue growth guidance. With that, let me pass it over to Geraldo on AI.

Ricardo Camatta Sodre: Nonetheless, its important to acknowledge the high level of volatility in this situation and that the situation may get worse before it gets better and then finally, it's important to point out that Argentina's performance was the most relevant driver responsible for our Q1 revenue being closer to the bottom off.

Geraldo: If the guidance and also the.

Geraldo: The most relevant driver responsible for us we viewing down our FX neutral.

Geraldo: Annual revenue growth guidance with that let me pass it over to Aldo on AI.

Geraldo do Carmo Thomaz: Oh, thank you. Thank you, Ricardo. Thiago, a very good question.

Geraldo: Well. Thank you. Thank you Joe.

Geraldo: Good question.

Geraldo do Carmo Thomaz: This.

Geraldo do Carmo Thomaz: There's been this revolution about using AI as a new building block, right? We're getting so many new capabilities being created by LLMs and models and stuff like that. And we believe that VTech is uniquely positioned to leverage these building blocks and give business meaning to retailers, manufacturers, and brands in the world. So that's why we're investing so much and leveraging the building blocks that people are creating all over the world. And you can see that.

Geraldo: There's been this revolution about using AI.

Geraldo do Carmo Thomaz: As the new building block, we're getting so many new capabilities being created by our Nevada and modules and stuff like that and we believe that <unk> <unk>.

Geraldo do Carmo Thomaz: Equally position too.

Geraldo do Carmo Thomaz: For two leverage.

Geraldo do Carmo Thomaz: Building blocks and gifts.

Geraldo do Carmo Thomaz: Meaning <unk> retailers and manufacturers and brands in the world.

Geraldo do Carmo Thomaz: It's why we're investing so much in.

Geraldo do Carmo Thomaz: Leveraging the building blocks.

Geraldo do Carmo Thomaz: <unk> are creating all over the world and.

Geraldo do Carmo Thomaz: I invite you to explore our latest VTech Vision Spring 2024 edition. We talk a lot about the things that we did and the roadmap that we're heading on. And we have product launches that are around four key directions, more or less, like creating fast and high-converting composable experiences, empowering sales reps across all channels, and ensuring faster and efficient fulfillment. All this while boosting productivity through AI. We launched a fast store framework. We're revolutionizing the way we are letting our customers build fast experiences on the website.

Geraldo do Carmo Thomaz: And you can see that.

Geraldo do Carmo Thomaz: I invite you to explore our latest with Activision and screen 20000 foot addition.

Geraldo do Carmo Thomaz: We've talked a lot about the things that we did that NPI.

Geraldo do Carmo Thomaz: The growth map that we have.

Geraldo do Carmo Thomaz: <unk>.

Geraldo do Carmo Thomaz: And we have.

Geraldo do Carmo Thomaz: Rob it's launches that are around four key <unk> more than that so I, creating fast and high converting compostable experiences.

Geraldo do Carmo Thomaz: Powering sales reps across all channels and ensuring faster and efficient.

Geraldo do Carmo Thomaz: All of these boosting productivity through AI.

Geraldo do Carmo Thomaz: <unk> cash towards stock framework.

Geraldo do Carmo Thomaz: We are revolutionizing the way we are letting our customers building fast experiences in the website.

Geraldo do Carmo Thomaz: This is not completely related to AI, but we think it's very important to our customers right now. But the ad network, as you can imagine, is leveraging AI a lot, and I think customers will use this a lot. Data pipelines. With data pipelines, we will enable our customers and partners to build AI models, leverage AI, to create possibilities of their own, and actually turn data into gold. We also launched a product called Detect Shield and Security Shield. You know, this, I think, with this value data has, with more value, people will capture more value.

Geraldo do Carmo Thomaz: This is not completely related to AI, but we think it's very important to our customers right now, but the AD network.

Geraldo do Carmo Thomaz: As you can imagine is leveraging AI, a lot and I think customers will leverage the a lot data pipelines with data platform will enable our customers and partners to build AI model assumed average AI.

Geraldo do Carmo Thomaz: With.

Geraldo do Carmo Thomaz: Yuval create possibilities of their own.

Geraldo do Carmo Thomaz: Actually turn data into gold.

Geraldo do Carmo Thomaz: We also launched a product called detect shields the acuity shift.

Geraldo do Carmo Thomaz: I think with the <unk> data has.

Geraldo do Carmo Thomaz: More value people capture more value.

Geraldo do Carmo Thomaz: Being sure that the data is self-guarded is fundamental to software like ours, so we launched this product as well. And so we are investing a lot, and as I said, we are... We're the right company to give business meaning to this AI revolution.

Geraldo do Carmo Thomaz: Being sure that data is self god that they put their mental cure software by call or so so we launched this product as well and.

Geraldo do Carmo Thomaz: So we are investing a lot in and as I said we are.

Geraldo do Carmo Thomaz: With the right company to give business, meaning should we say high resolution.

Thiago Kaposkis: Great, thank you so much for the answers guys, and I'll definitely explore the video and the content. Thank you.

Speaker Change: Great. Thank you so much for the answers guys then I'll definitely explore.

Thiago Kaposkis: The video the content. Thank you.

Speaker Change: Thank you.

Madison Taylor Schrage: Your next question comes from the line of Maddie Schrage from KeyBank. Your line is open.

Speaker Change: Our next question comes from the line.

Madison Taylor Schrage: Matty Schrag from Keybanc Your line is open.

Madison Taylor Schrage: Hey guys, and thank you for taking my question. You know, besides Argentina, I just kind of wanted to talk through maybe some of your other geographies. I'm wondering if there may be any tailwinds in the rest of the world or anything like that that could partially offset it. Thanks.

Madison Taylor Schrage: Hey, guys and thank you for taking my question.

Madison Taylor Schrage: Besides Argentina, just kind of wanted to talk through maybe some of your other geographies I'm wondering if.

Madison Taylor Schrage: Maybe any tailwind in rest of world or anything like that that could partially offset yet thanks.

Ricardo Camatta Sodre: Yeah, happy, happy to start, and then others feel free to chime in. Thanks, Maddy.

Speaker Change: Yes happy to start and then others feel free to chime in thanks Mehdi.

Ricardo Camatta Sodre: So, as I mentioned in my first answer, we saw this headwind in Argentina, but we saw other countries performing well: Brazil, Colombia, Mexico, the US, Europe. Also, I would highlight that Brazil continues to show strong momentum in signing new contracts and new sales, even with the relevant market share that we have in the country. Our strong position and the strong ecosystem that we have are helping with that. And also, the way we see our retailers, our customers in Brazil, integrating the physical stores and accelerating their, you know, same store sales has been positive. So overall, we see good performance in our other geographies, which is encouraging for our year as well. I'm not sure if that answers the question or if others want to chime in.

Speaker Change: As I mentioned in my first answer we saw these headwinds in Argentina, but we saw the other countries performing well.

Ricardo Camatta Sodre: Brazil, Colombia, Mexico, the U S Europe.

Ricardo Camatta Sodre: Also I would highlight that Brazil continues to show strong momentum.

Ricardo Camatta Sodre: E signing new contracts and new sales.

Ricardo Camatta Sodre: Even with the relevant market share that we have in the country our strong position in the strong ecosystem that we have is helping on that.

Ricardo Camatta Sodre: And also the way we see our.

Ricardo Camatta Sodre: Retailers are our customers in Brazil, integrating the physical stores.

Ricardo Camatta Sodre: And accelerating their.

Ricardo Camatta Sodre: Same store sales has been a positive.

Ricardo Camatta Sodre: So overall, we see.

Ricardo Camatta Sodre: Good performance.

Ricardo Camatta Sodre: On our other geographies, which is encouraging for our year as well.

Speaker Change: I'm not sure if that answers the question Thats why theres wants to chime in.

Madison Taylor Schrage: Yeah, I think I just have a quick follow-up for you as well. But I was wondering if you could maybe talk about, you know, the sales motion right now, kind of what the mix of revenue between existing and new customers might be, and maybe if you could kind of size the backlog for us, I think that'd be helpful too.

Speaker Change: Yeah, I think I just have a quick follow up for you as well, but wondering if you could maybe talk about the sales motion right now kind of what.

Madison Taylor Schrage: Maybe the mix of revenue between existing and new customers and maybe if you could kind of size.

Madison Taylor Schrage: Backlog for us would be helpful.

Mariano Gomide de Faria: Hey Mariano here. Just mention a little bit about the sales momentum if I understand your question correctly. We are seeing a consistent improvement in the pipeline. Not one specific country, but globally.

Mariano: Hi, Mariano here.

Madison Taylor Schrage:

Mariano: Just to mention about a little bit on the sales momentum if I understand correctly. Your question, we are seeing a consistent improvement in the pipeline.

Mariano: Not one specific country, but globally.

Mariano Gomide de Faria: This is a consequence of the tech's position in most of the analyst companies, such as Forrester, IDC, and Gartner. So we are receiving good reports. We are enhancing our positioning, and we are invited to more and more RFPs globally. We are recognizing the good momentum. We are on track with the sales goals we planned for the year. However, we need to highlight the volatile period for retailers and manufacturers all over the world in this environment of high interest rates.

Mariano: As a consequence of the tax position in most of these companies such as Forrester IDC and Gartner. So we are receiving good reports.

Mariano Gomide de Faria: We are enhancing our positioning and we are invited to more and more rfps globally.

Mariano Gomide de Faria: We are recognizing the good momentum we are on track with the sales goals, we plan for the year.

Mariano Gomide de Faria: However, we need to highlight the <unk> period for retailers and manufacturers all over the world in these environment of high interest rates.

Mariano Gomide de Faria: This will bring some volatility, and we might end up being a good solution for this world that will pursue more efficiency. And it's going to be really tough years ahead for all retailers. It's not one year; it's going to be like three, four, five years of disruption.

Mariano Gomide de Faria: These are and will bring some volatility and we might end up being.

Mariano Gomide de Faria: <unk>.

Mariano Gomide de Faria: Good solution for these world that we'll pursue more efficiency.

Mariano Gomide de Faria: It's going to be really tough years ahead for all retailers is not one year is going to be like three or four or five years.

Mariano Gomide de Faria: A shift so we are being very diligent and opened new organic channels and increasing profitability for our active customers and we are really focused on helping.

Mariano Gomide de Faria: So we are being very diligent in opening new organic channels and increasing profitability for our active customers, and we are really focused on helping them to simplify their operations and delivery efficiency for the bottom line. In this high interest rate and high inflation environment, seamless integration, ecosystem-ready software, and efficient architecture are essential to minimize maintenance costs and accelerate revenue. So with all the more than 1,000 system integrators and more than 6,000 VTX IO extensions by third parties, VTX provides a very comprehensive solution we call the complete and composable solution that can help retailers all over.

Mariano Gomide de Faria: To simplify their operations and delivery efficiencies in the bottom line.

Mariano Gomide de Faria: In these high interest rate and high inflation environment.

Mariano Gomide de Faria: Seamless integration.

Mariano Gomide de Faria: Ecosystem ready software.

Mariano Gomide de Faria: And efficient architecture are essential to minimize maintenance costs and accelerating revenue.

Mariano Gomide de Faria: With all the more than 1000 system integrators and <unk>.

Mariano Gomide de Faria: More than 6000, the textile youll extensions by third parties.

Mariano Gomide de Faria: <unk> provides a very comprehensive solution we call the complete.

Mariano Gomide de Faria: Mentioning Brazil, we still have a lot of room to grow on the B2C side, and we have an enormous B2B market to be discovered in Latin America. This quarter, the arrival of Nike in Colombia is a significant milestone. In Europe, our expansion into Germany with OBI sets solid foundations for us to build on. That's the summary; mainly the recognition of the industry experts, Gartner Customer Choice; we were the only company to achieve the Customer Choice Award, and the IDC acknowledgement of Vitek as the main leader on B2C and a major leader for B2B also completes the good momentum on branding and positioning for Vitek.

Mariano Gomide de Faria: And compostable solution that can.

Mariano Gomide de Faria: Help the retailers all over mentioning Brazil.

Mariano Gomide de Faria: We still have a lot of room to grow on the BDC and we have a <unk>.

Mariano Gomide de Faria: <unk> market to be discovered in Latin America, we have significant groundwork to cover.

Mariano Gomide de Faria: And this quarter, having the go live of Nike in Colombia is a significant milestone in Europe, our expansion into Germany with OPI sets, a solid foundation for us to build up on them. So.

Mariano Gomide de Faria: That's the summary, mainly the recognition of the industry experts Gardner customer choice. So we were the only company to achieve the customer choice award and the ITC acknowledgment of the Tech system, mainly there on BTC and a major leader for B to B also completes.

Mariano Gomide de Faria: The good momentum on branding and positioning in <unk>.

Ricardo Camatta Sodre: And maybe just to build quickly, Mariano, I think there was a question from Maddie as well on existing versus new customers. So we continue to see, you know, our same store sales at the meetings level. If you look at a GMB basis and on overall revenue growth for the company, we continue to see that roughly one-third of our revenue is coming from our existing customer base, and roughly two-thirds of the revenue growth is coming from adding new customers to the customer base.

Mariano Gomide de Faria: And maybe just to build quickly and Mariano I think there was a question from Mehdi as well on the existing versus new customers. So we continue to see in our same store sales on the mid teens level. If you look on a <unk> basis and on the overall revenue growth for the company.

Ricardo Camatta Sodre: We continue to see that roughly one third of our revenue is coming from our existing customer base and roughly two thirds of the revenue growth coming from adding new customers to the customer base.

Unknown Executive: I appreciate it, guys. Thank you.

Speaker Change: I appreciate it guys. Thank you.

Luca Brendan: Again, if you would like to ask a question, press star 1 on your telephone keypad. Your next question comes from the line of Luca Brendan from Bank of America. Your line is open.

Unknown Executive: Again, if you would like to ask a question press Star one on your telephone Keypad. Your next question comes from the line of Luke Brendan from Bank of America. Your line is open.

Luca Brendan: Hi, good afternoon, everyone. Thank you for taking my questions. I have two here on my side.

Luca Brendan: Hi, Good afternoon, everyone. Thank you for taking my questions I have two here on my side first of all on gross margin. It was really strong this quarter and it is getting close to what you guys said the target model.

Luca Brendan: First of all, gross margin was really strong this quarter, and it's getting close to what you guys said as the target model for the coming years, even in a soft quarter. So we probably should expect gross margin to be higher for the full year. So I just wanted to see when do you guys think you could be reaching this target model? And looking forward, what do you think could be the gross margin for the company at maturity?

Luca Brendan: For the coming years, even in a soft quarter. So we probably should expect gross margin to be higher for the full year. So I just wanted to see when do you guys think you could be reaching.

Luca Brendan: This target model and looking forward.

Luca Brendan: What do you think could be the gross margin for the company maturity or how can we think about that going forward.

Luca Brendan: Or how should we think about that going forward? And then, secondly, ties a little bit to the first question, but on service revenues, it was down year over year. And I just wanted to understand how we could think about this line going forward. Should it continue at similar levels in nominal rates? Or should it also expand from current levels?

Luca Brendan: Then second ties a little bit to the first question, but on service revenues it was down year over year.

Luca Brendan: Thank you.

Luca Brendan: And I just wanted to understand how we could think about this line going forward should it continue at similar levels in nominal rates or.

Luca Brendan: Should it also expands from current levels. Thank you.

Ricardo Camatta Sodre: Thanks. Thanks, Luca.

Speaker Change: Thanks, Thanks, Luca thanks for bringing that up.

Speaker Change: Ill start with gross margin and then I'll pass it over to Mariano regarding services revenue.

Ricardo Camatta Sodre: Thanks for bringing that up. I'll start with gross margin, and then I'll pass it over to Mariano regarding services revenue. So in Q1, we achieved a non-gap gross margin of 72%, marking a year-over-year expansion of over 600 basis points. And despite the seasonal effects typical of Q1, as you mentioned, this brings us closer to our investor day target of 75% for our overall gross margin. And it's 80% for the subscription gross margin, right? And we also achieved 77% for the subscription gross margin. So I was always also getting closer, closer there as well.

Ricardo Camatta Sodre: In Q1, we achieved a non-GAAP gross margin of 72%, marking our year over year expansion of over 600 basis points.

Ricardo Camatta Sodre: And despite the seasonal effects typically Q1 is you mention.

Ricardo Camatta Sodre: This brings us closer to our Investor day target of 75% for our overall gross margin and it's 80% for the subscription gross margin rate and we also achieved 77% on the subscription gross margins always also getting closer and closer to that as well.

Ricardo Camatta Sodre: And approximately two-thirds of our subscription costs are related to hosting, and we have significantly enhanced our cloud efficiency. These efforts include migrating systems to Linux, optimizing CPU usage, and reducing costs through caching and outscaling. And all while maintaining or improving performance, right?

Mariano: And approximately two thirds of our subscription costs are related to hosting and we have significantly enhanced our cloud efficiency.

Ricardo Camatta Sodre: These efforts include migrating systems to Linux, optimizing CPU usage, and reducing costs through cashing in all scaling and all while maintaining or improving performance right. So that has been helping a lot our subscription gross margin rigs.

Ricardo Camatta Sodre: So that has been helping a lot our subscription gross margin. Regarding the services gross margin side, although some volatility has been observed, the improvement is primarily attributed to our strategic adjustment away from the hypercare modes for key new customers in the U.S. and Europe as they go live. So we remain focused on the opportunity to enhance our subscription gross margin and the overall gross margin. While some services gross margin volatility is inherent in our business, we anticipate further improvement in this area in the future.

Ricardo Camatta Sodre: Regarding to the services gross margin side, although some volatility has been observed the improvement is primarily attributed to our strategic adjustment away from the hyper care modes for key new customers in the U S and Europe as they go live.

Ricardo Camatta Sodre: We remain focused on the opportunities to enhance our subscription gross margin and the overall gross margin.

Ricardo Camatta Sodre: <unk> services gross margin volatility easy inherent in our business. We anticipate further improvement in this area in the future and we're moving towards our goal that was disclosed in the last investor day off 80% subscription gross margin in 75% overall gross margin and that's our medium.

Ricardo Camatta Sodre: And we're moving towards our goal that was disclosed on the last investor day of 80% subscription gross margin and 75% overall gross margin. And that's a medium-term goal for the next three to five years. It's not a terminal growth model. We don't have the visibility yet for the terminal model, but for these next three to five years, that's what we are going after. With that said, let me pass it over to Mariano to talk about services revenue.

Mariano: Third goal for the next like three to five years, it's not a terminal model growth. We don't have the visibility yet for the terminal model, but what these next three to five years, that's what we are going after.

Ricardo Camatta Sodre: With that let me pass it over to Mariano to talk about our services revenue.

Mariano Gomide de Faria: Yeah, clarifying a little bit more on the service margin, our service revenue, which includes our solution architect offering during major customer implementations, naturally experiences some volatility as accounts go live and the stage of development of a new geos is expanding. So it's expected by design to have some volatility. This time last year, we had a few accounts in the implementation phase, like, for example, OBI, that we just announced in a hypercare mode that said we would expand a little bit more on hypercare.

Mariano: Yes, clarify a little bit more on the service margin.

Mariano Gomide de Faria: Service revenue.

Mariano Gomide de Faria: Which includes our solution architect offering during major customer implementations naturally experienced some volatility as accounts goes live and the stage of development of a new geos are expanding so it is expected by designed to have some volatility. This time last year, we had a few accounts.

Mariano Gomide de Faria: In.

Mariano Gomide de Faria: <unk> face like for example will be eye that we just announced.

Mariano Gomide de Faria: Hyper care mode that to say, we would expand a little bit more on the hybrid.

Mariano Gomide de Faria: So that volatility is expected but.

Mariano Gomide de Faria: So that volatility is expected. But while there are no significant changes in the model and design of the services to report, aside from what I already mentioned, that volatility is expected; we will continue to execute. We remain optimistic about services as we are increasing our system integrator reach and the system integrators are becoming more and more mature. So a broader and more mature ecosystem will bring the volatility on the service revenue and service expenses of VTX a little bit down. So we will be able to scale delivery with less direct service from VTX. And that's, by design, the ultimate goal for a platform like VTX.

Mariano Gomide de Faria: While there are.

Mariano Gomide de Faria: No significant changes in the model and design all of the services to report aside from what I already mentioned Thats expected volatility.

Mariano Gomide de Faria: We will continue to execute we remain optimistic on service as we are increasing our system integrator reach and the system integrators are becoming more and more mature so broader and more mature ecosystem will drive will bring the volatility on the service.

Mariano Gomide de Faria: Revenue and service expenses of the <unk>.

Mariano Gomide de Faria: In.

Mariano Gomide de Faria: And it'll be down so.

Mariano Gomide de Faria: We will be able to scale the deliveries with less direct service of the texts and that's by design. The ultimate goal for a platform like <unk> like us.

Luca Brendan: I said it very clearly, thank you for the answers.

Speaker Change: Okay very clear thank you for the answers.

Geraldo do Carmo Thomaz: That concludes our question and answer session. I will now turn the call back over to Geraldo for some final closing remarks.

Luca Brendan: That concludes our question and answer session I will now turn the call back over to Gerardo for some final closing remarks.

Geraldo do Carmo Thomaz: In conclusion, it's evident that in today's high interest rate environment, retailers and brands urgently need effective tools to enhance margins and optimize organic sales channels. Vitex is fully committed to providing actionable strategies for B2B and B2C enterprises to maximize ROI and elevate their e-commerce platform.

Geraldo do Carmo Thomaz: Conclusion.

Geraldo do Carmo Thomaz: Evident that in today's high interest rate environment.

Speaker Change: Taylor's and brands urgently need effective tools to enhance margins and optimize organic sales changes.

Geraldo: <unk> is fully committed to providing actionable strategies for <unk> and DTC enterprise to maximize ROI and elevated e-commerce platforms.

Geraldo do Carmo Thomaz: By integrating cutting-edge innovations, we're ready to unveil fresh audiences and insights, empowering our customers to achieve even more impactful consumer engagement. Our unwavering dedication to customer-centricity and innovation-driven solutions is not merely shaping the future of commerce. It is redefining it.

Geraldo: By integrating <unk> innovations were ready to overview fresh audiences and insights.

Geraldo do Carmo Thomaz: Following our customers to achieve even more impactful consumer engagement.

Geraldo do Carmo Thomaz: Our wavering dedication to customer Centricity and innovation driven solutions is not mailing shaping the future of Congress.

Geraldo do Carmo Thomaz: It is well defined.

Geraldo do Carmo Thomaz: We are excited about the results of the first quarter. Our gross margin and operating margin expansion was remarkable and sets a strong foundation for our sustainable profitable growth. At Vitex, we stand stronger and more robustly positioned than ever before. We focus on growth and margin, underpinned by a remarkably strong business model. This is our time, and we are ready to cease. Thank you, everyone, for being part of this exciting journey. We look forward to keeping you updated on our next earnings call. Have a wonderful week.

Geraldo do Carmo Thomaz: We are excited about the results after first quarter, our gross margin and operating margin expansion was remarkable and sets a strong foundation for sustainable profitable growth at <unk>.

Geraldo do Carmo Thomaz: We still stronger if more robustly position than ever before we focus on growth and margins underpinned by a remarkably strong business model.

Geraldo do Carmo Thomaz: This is our time and we are ready to seize it.

Geraldo do Carmo Thomaz: Thank you everyone for being part of this exciting journey, we look forward to keeping you updated at our next earnings call have a wonderful week.

Operator: This concludes today's teleconference. Thank you for your participation. You may now disconnect.

Speaker Change: This concludes today's teleconference. Thank you for your participation you may now disconnect.

Speaker Change: Please wait the conference will begin shortly.

Operator: [music].

Operator: Okay.

Operator: [music].

Operator: Okay.

Operator: Yes.

Operator: Okay.

Operator: Yes.

Operator: Yes.

Operator: Okay.

Operator: Yes.

Operator: [music].