Q2 2024 VTEX Earnings Call

Thank you for standing by my name is Martin deep and I'll be your operator today at this time I'd like to welcome everyone to the <unk> reports second quarter 'twenty 'twenty four financial results.

Operator: Thank you for standing by. My name is Mandeep, and I'll be your operator today. At this time, I'd like to welcome everyone to the VTX Report Second Quarter 2024 Financial Results.

Thank you for standing by.

Operator: My name is Monty, but I'll be your operator today.

Operator: All lines are placed on mute to prevent any background noise. After the speaker 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'd like to withdraw your question, press star one again. Thank you. I would now like to turn the call over to Julia Vatter-Fernandez, Investor Relations Director.

Operator: At this time, I'd like to welcome everyone to the V-Tex Report, second quarter, 2024, financial results.

Speaker Change: All lines have been placed on mute to prevent any background noise. 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'd like to withdraw your question Press Star. One again. Thank you I would now like to turn the call over to Juliet Doctor Fernandez.

All lines we can place on the intro of any background noise.

After the speaker's remarks, there will be a question-and-answer session. If you'd like to ask a question during this time, simply press starfall by the number one in your telephone keypad. If you'd like to withdraw your question, press star 1 again. Thank you.

Julia Vatter-Fernandez: Hello, everyone, and welcome to the VTEX Earnings Conference call for the quarter ended June 30, 2024. I am Julia Barro 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 Gomirez, Faria, Founder and Co-CEO, and Andres Polidoro, Chief Strategy Officer, will be available during today's Q&A session.

Julia Vatter Fernandez: I would now like to turn the call over to Julia Vatter Fernandez, Investor Relations Director. You may begin. Hello everyone. Welcome to the V-Tex earnings conference close for the quarter and the 23rd, 2024. I am Julia Vatter Fernandez, Investor Relations Director for V-Tex.

Speaker Change: Investor Relations Director you may begin.

Speaker Change: Hello, everyone and welcome to the <unk> earnings Conference call for the quarter ended June 32024, and you'll hear about it on this investor relations director for vertex.

Julia Vatter-Fernandez: I would like to remind you that management may make forward-looking statements relating to such matters as continued growth prospects for the company, industry trends, and 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 available information, you are cautioned not to place new reliance on this forward-looking statement.

Julia Vatter-Fernandez: Certain risks and uncertainties are described in the risk factors and forward-looking statement section 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. 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 GAAP measures can be found in our second quarter 2024 earnest press release available on our investigation website. Now, let me turn the call over to Geraldo. Geraldo, the floor is yours. Thank you.

Julia Vatter Fernandez: Our senior executives present in today are Geraldo Thomaz, who in your family and will see you, and Ricardo Camata Sabre, two financial officers. Additionally, Mariano will be the Faria, founder, and will see you, and another positive or a tip strategy officer will be available during today's training session. I would like to remind you that management may make forward-looking statements relating to such matters as continued growth prospects for the company in this trend and product and technology initiatives. These statements are based on currently available information, and I will current assumptions of expectations and projections about future events.

Speaker Change: Our senior executives present into they argued I'll, let them issue in your Thunder in Brasil and they've got to come at the Saturday Chief Financial Officer. Additionally, but you know what I mean, everybody else on their uncle CEO analytical chip tried to ERP search will be available during today's Q&A session.

Speaker Change: I would like to remind you that management may make forward looking statements relating to such matters as continued growth prospects for the company industry trends and better than the girls fee initiatives.

Speaker Change: These statements are based on garden leave alone.

Speaker Change: Our mission and our current assumptions expectations and projections about future events, while we believe that our west coast expectations and projections are reasonable in view of the current available information you're cautioned not to place undue reliance on these forward looking statements certain risks and uncertainties are described under risk factors and forward looking.

Well, we believe that our representatives' 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. Certain risks and uncertainties are described on the risk factors and forward-looking statements section of V-Tex Forum 20-F for the year and December 31, 2023, and other V-Tex filings within the U.S. Securities and Exchange Commission, which are available on our investor relations website.

Speaker Change: This section of <unk> form 20-F for the year ended December 31st 2023, and other <unk> filings within the U S Securities and Exchange Commission, which are available on our Investor Relations website.

Finally, I would like to remind you that during the course of this conference call, we might discuss non-Gab measures. Our reconciliation of those measures to the nearest comparable GAAP measures can be found in our second quarter of 2004 and its press release available on our investor relations website.

Speaker Change: 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 GAAP measures can be found in our second.

Speaker Change: Water turned it into four earnings press release available on our Investor relation website now let me turn the call over to get out of this that although the floor is yours.

Now, let me turn the call over to the results, the results of the Faria series. Thank you, Julia.

Geraldo Thomaz: Thank you, Julia. Welcome, everyone, and thank you for joining our second quarter 2024 EARNEST conference call. The company's positioning is stronger than ever, with a clear alignment between our value proposition and the needs of global enterprises. This is evidenced by our existing customers consistently outperforming the market and our sustained sales momentum. This allowed us to deliver another robust quarter and give us confidence in our future growth strategy. As a result, our GMV grew by 19% and revenues increased by 22%, both in FX Neutrality.

Speaker Change: Thank you Julia welcome everyone and thank you for joining our second quarter 2024 earnings Conference call.

Geraldo Thomaz: Welcome everyone, and thank you for joining our second quarter 2024 On its conference call. The text positioning is stronger than ever with a clear alignment between our valid proposition and the needs of global enterprises. This is evidenced by our existing customers consistently outperforming the market and our sustainable sales momentum. This allows us to deliver another robust quarter and give us confidence in our future growth statistics. As a result, our GMV group by 19% and revenues increased by 22% both in FX neutral, boosted by new content signatures, cross-standing addons, and solid net revenue retention performance. Additionally, our ongoing subscription and service cost optimization has resulted in FX neutral year over year gross profit growth of 34%.

Speaker Change: <unk> positioning is strong good didn't happen with a clear alignment between our value proposition and the needs of global enterprises.

Speaker Change: As evidenced by our existing customers consistently outperforming the market and sustaining sales momentum.

Speaker Change: This allowed us to deliver another robust quarter and gives us confidence in our future growth prospects.

Speaker Change: As a result, our gmg grew by 19% and revenues increased by 22% both in FX neutral booths.

Geraldo Thomaz: Boosted by new contract signatures, cross-selling add-ons, and solid net revenue retention performance. Additionally, our ongoing subscription and service cost optimization has resulted in FX Neutral year-over-year gross profit growth of 34%. We've made significant strides in developing a more efficient and resilient structure aimed at maximizing growth and capturing demand. Our team continues to enhance cloud efficiency while maintaining performance. As our ecosystem matures globally, our need to invest in services for new customers decreases, leading to a significant increase in gross margin quarter over quarter, even after the strong results in Q1.

Speaker Change: Boosted by new contract signatures cross selling in adults and solid net revenue retention performance. Additionally, our ongoing subscription and service cost optimization has resulted in FX neutral year over year gross profit growth of 34%.

Geraldo Thomaz: We've made significant strides in developing a more efficient and resilient structure aimed at maximizing growth and capturing demand. A team continues to enhance cloud efficiency while maintaining performance. As our ecosystem achievers globally, our needs to invest in services for new customers decreases, leading to a significant increase in growth margin, quarter to quarter, even after the strong results in Q1. A steady-fast commitment to profitable growth has viewed that significant year-over-year known gap over 80 margin expansion in the last eight quarters, starting with 26 percentage points gained in the third quarter of 2022, picking at 42 percentage points in the second quarter of 2023, and reaching approximately 15 percentage points over the last three quarters.

Speaker Change: We've made significant strides in developing a more efficient and resilient structure.

Speaker Change: At maximizing growth and capturing demands.

Speaker Change: Our team continues to enhance cost efficiency, while maintaining performance.

Speaker Change: As our ecosystem matures globally.

Speaker Change: Each invest in services for new customers decreases.

Speaker Change: Due to a significant increase in gross margin quarter over quarter, even after the strong results in Q1.

Geraldo Thomaz: A steady-fast commitment to profitable growth has yielded significant year-over-year known gap operating margin expansion in the last eight quarters, starting with 26 percentage points gained in the third quarter of 2022, peaking at 42 percentage points in the second quarter of 2023 and reaching approximately 15 percentage points over the last three quarters. Following our remarkable journey, we still see room for operational leverage gains, although at a more moderate pace. Our cost optimization initiatives and disciplined approach to expenses are reflected in our numbers, positioning us well to reach the target model share that is invested.

Speaker Change: Our steady fast commitment to profitable growth has yielded significant year over year non-GAAP operating margin expansion in the last eight quarters.

Speaker Change: With 26 percentage points gain aimed to third quarter of 2020 too picky.

Speaker Change: Speaking at 42 percentage points in the second quarter of 2023, and reaching approximately 15 percentage points over the last three quarters. Following a remarkable journey, we still see room for operational leverage gains although at a more moderate.

Following our remarkable journey, we still see room for operational leverage gains, although at a more modern pace. Our cost optimization initiatives and discipline approach to expenses are reflected in our numbers, positioning us well to reach the target model shared that are invested in.

Speaker Change: Base.

Speaker Change: Our cost optimization initiatives and disciplined approach to expenses.

Speaker Change: Reflected in our numbers positioning us well to reach the target model shared at our Investor day.

Geraldo Thomaz: That said, let me now provide more insights into our operation and leaving the cars to cover the financials later. In the second quarter of 2024, we celebrated the successful goal-life of new customers such as Choose in Australia, our Money, Color Mark, Drug-Out and Pinnale-Barate in Brazil, the Line Group in Chile, at the Marketplace in Colombia, Group of NASA and the Bredias Gandhi in Mexico, Ajayas Seguro in Portugal, and My Eye Doctor in the US. Additionally, we continue our expansion with existing customers adding more brands or new regions, such as Exitty, who added four brands in Colombia, now operating with 11 brands across five countries in last term.

Geraldo Thomaz: That said, let me now provide more insights into our operation, leaving Ricardo to cover the financials later. In the second quarter of 2024, we celebrated the successful go-live of new customers, such as Shoes in Australia, Armani, Colormark, Drogal, and Pneu Barato in Brazil, the Lime Group in Chile, Addi Marketplace in Colombia, Grupo Nazan, and Librerias Gandhi in Mexico. Ajeia Seguro in Portugal and my eye doctor in the US.

Speaker Change: That said, let me now provide more insights into our operation.

Speaker Change: Leasing he guided to cover the financials later.

Speaker Change: In the second quarter of 2024, we celebrated the successful go live of new customers.

Speaker Change: Choose in Australia, our money color, Marc drove Gao emptied nobody opt in Brazil.

Speaker Change: <unk> group, Chile, IV market place in Colombia, Grupo <unk> is there.

Speaker Change: Brad you can see in Mexico.

Speaker Change: J S. The Guru in Portugal in my eye Doctor in the U S.

Geraldo Thomaz: Additionally, we continue our expansion with existing customers, adding more brands or new regions, such as Exiti, who added four brands in Colombia, now operating with 11 brands across five countries in Latin America. Hearst, who added Cosmopolitan, now operating with three stores in the U.S. Multilaser in Brazil, who added a new brand, PGI, now operating with three stores in the country. Motorola, who added a store in Sweden, now operating across APAC, Canada, EMEA, Latin America, and the U.S. Nike, who added a store in Uruguay, now operating in four countries across LATAM, and Victoria's Secret, who added a store in El Salvador, now operating in 12 countries across LATAM.

Speaker Change: Additionally, we continue our expansion with existing customers, adding more brands or new regions, such as exiting who added four brands in Colombia, now operating with 11 brands across five countries in lockdown.

First, who added Cosmopolitan, now operating with three stores in the US. Multilater in Brazil, who added a new brand, DJI, now operating with three stores in the country. Motorola, who added a store in Sweden, now operating across APEC, Canada, EMEA, Latin and the US. Nike, who added a store in Uruguay, now operating in four countries across Latin, and Victoria's Secret, who added a store in El Salvador, now operating in 12 countries across Latin.

Speaker Change: Most who added cosmopolitan now operating with two stores in the west multi laser in Brazil, who added a new brand Pgi now operating with three stores in the country.

Speaker Change: Sure.

Speaker Change: Where did the stores in Sweden, now operating across APAC, Canada, EMEA, Latam and the U S. Now.

Speaker Change: Nike, who added a starting Uruguay now operating in full countries across Lotto and Victoria's secrets, who added that starting in El Salvador now operating in 12 countries across locked up.

The second quarter is always special for us because of VTEC date, an event that holds a unique place in our hearts. It allows participants to grasp the size of our ecosystem and gain deeper insight into our value proposition and new products. It also enables us to cross our features and attract new customers.

Geraldo Thomaz: The second quarter is always special for us because of VTEX Day, an event that holds a unique place in our hearts. It allows participants to grasp the size of our ecosystem and gain deeper insight into our value proposition and new products. It also enables us to cross-sell features and attract new customers. While this time, I will not delve into VTEX Day, I'm excited to share a new milestone. Following the success of our inaugural U.S. event in the first quarter, we have now celebrated our first European event.

Speaker Change: The second quarter is always is special for us because of the <unk> date.

Speaker Change: That holds a unique place in our hearts.

Speaker Change: It allows participants to grasp the size of our ecosystem and gain deeper insight into our value proposition and new products.

Speaker Change: It also enable us to cross sell features and attract new customers. While at this time I will not be all seem to be tax date I'm excited to share a new milestone.

While this time, I will not delve into VTEC's day, I'm excited to share a new model. Pastor. Following the success of our inaugural U.S.

Speaker Change: Following the success of our inaugural U S. Okay.

Geraldo Thomaz: event in the first quarter, we have now celebrated our first European event. Detects Connect Europe, held in Barcelona, attracted over 3,000 registrants from more than 50 countries, featured over 60 sponsors, and delivered more than 10 hours of content, led by over 30 of Europe's most-renowned e-commerce leaders. Penals included representatives from OBI, Mars, Red Cloud, Starbucks, Records, among others. We are encouraged by the results of this event and our growth potential in the region. Another encouraging factor enhancing our global positioning is the recognition from industry analyst firms. 2024 has already been a remarkable year, with Detects being consistently recognized for its product strategy and vision.

Speaker Change: In the first quarter, we have now celebrated our first European event.

Geraldo Thomaz: Vitex Connect Europe, held in Barcelona, attracted over 3,000 registrants from more than 50 countries, featured over 60 sponsors, and delivered more than 10 hours of content led by over 30 of Europe's most renowned e-commerce leaders. Panelists included representatives from OBI, Mars, Red Cloud, Starbucks, and Racket, among others. We are encouraged by the results of this event and our growth potential in the region. Another encouraging factor enhancing our global positioning is the recognition from industry analyst firms.

Speaker Change: <unk> connect Europe housing Barcelona attracted over 3000 graduate students from more than 50 countries featured over six sponsors and delivered more than 10 hours of content.

Speaker Change: It did by over 30 of your peers most E.

Speaker Change: E Commerce users.

Speaker Change: Hey News included Representatives from Obi, I, Mars rats cloud Starbucks Reckitt among others.

Speaker Change: We are encouraged by the results of these events and our growth potential in the region.

Speaker Change: Another encouraging factor enhancing our global positioning is still recognition from industry analyst firms.

Geraldo Thomaz: 2024 has already been a remarkable year, with Vitex being consistently recognized for its product, strategy, and vision. This quarter, I am proud to announce that Vitex has been named the leader for the first time in the IDC market space, worldwide headless digital commerce applications for mid-market growth 2024 vendor assessment. We work on knowledge for providing comprehensive, unified commerce solutions, including B2B, B2C, B2X, omni-channel, experiential commerce, and marketplaces, a native marketplace and OMS capabilities, developer-friendly tools and support, and a robust serverless development platform for rapid, scalable, and flexible e-commerce solutions.

Speaker Change: <unk> 24 has already began remarkable year.

Speaker Change: With these tax being consistently recognized it.

Speaker Change: Product strategy and vision this quarter I am proud to announce that <unk> has been named the leader for the first time in D C market space.

This quarter, I am proud to announce that Detects has been named the leader for the first time in the IDC market space, worldwide headless digital commerce applications for mid-market growth, 2024 vendor assessments. We were acknowledged for providing comprehensive unified commerce solutions, including B2B, B2C, B2X, omnichannel, experiential commerce and marketplaces, a native marketplace and OMS capabilities, developer-friendly tools and support, and a robust serverless development platform for rapid, scalable and flexible e-commerce solutions. Combined it with the record emissions received in the first quarter, we can now say, Detects is a leader in B2B, B2C, and headless digital commerce according to IDC.

Speaker Change: Why tablets digital commerce applications for meet the market's growth 2024 vendor assessments.

Speaker Change: And knowledge for providing comprehensive unified commerce solution, including Beecher be beat you see <unk> omni channel experiential commerce and marketplaces.

Speaker Change: <unk> marketplace, and the Oems capabilities developer friendly tools and support and a robust surplus development.

Speaker Change: Development.

Speaker Change: Pro rapid scalable and flexible E Commerce solutions.

Speaker Change: Combine that with the recognitions we received in the first quarter. We can now say Jack is that we did in <unk> B B to C and had to live digital commerce. According to IDC.

Geraldo Thomaz: Combined with the recognitions received in the first quarter, we can now say Vitex is a leader in B2B, B2C, and headless digital commerce according to IT. We are encouraged by these recognitions, which boost our confidence in our global expansion journey and affirm that we are on the right path. In a world where the value of building connections is exponential, we are committed to evolving and strengthening our network of partners and channels, ensuring we stay ahead of our customers' dynamic needs and unlock new go-to-market strategies for them.

We are encouraged by this recognition, which boosts our confidence in our global expansion journey and affirm that we are on the right path.

Speaker Change: We are encouraged by these good cognition, which boost our confidence in our global expansion journey and therefore debt.

Speaker Change: That we are on the right batch.

Geraldo Thomaz: In the world where the value of building connections is exponential, we are committed to evolving and strengthening our network of partners and channels, ensuring we stay ahead of our customers' dynamic needs and unlock new go-to-market strategy for them. With this in mind, in the first half of the year, we've expanded our partnership with TikTok, which has grown from Brazil to the rest of Lata, and this quarter, we're true to launch a partnership with Pinterest, further expanding our customers' social commerce opportunities. Through this collaboration, our global customers can seamlessly integrate their product catalogs, create teams, and execute high-performance shopping campaigns on Pinterest, reaching over 500 million monthly activities.

Speaker Change: In a world where the value of building connections is explanation, we are committed to evolving and strengthening our network of partners and channels, ensuring we stay ahead of our customers dynamic needs and unlock new go to market strategy for them.

Geraldo Thomaz: With this in mind, in the first half of the year, we've expanded our partnership with TikTok, which has grown from Brazil to the rest of Latin America. And this quarter, we're launching a partnership with Pinterest, further expanding our customer social commerce opportunity. Through this collaboration, our global customers can seamlessly integrate their product catalogs, create pins, and execute high-performance shopping campaigns on Pinterest, reaching over 500 million monthly active users. This partnership advances our mission to empower global enterprise brands to deliver seamless shopping experiences and engage with consumers seeking inspiration in a positive online shopping environment.

Speaker Change: This in mind in the first half of the year.

Speaker Change: Expanded.

Speaker Change: Partnership with Tic, Toc, which has grown from Brazil to the rest of Latam.

Speaker Change: And this quarter were to launch a partnership with Pinterest further expanding our customers' social commerce opportunity.

Speaker Change: Through this collaboration are global customers can seamlessly integrate their product catalogs create teams.

Speaker Change: Cute high performance shopping campaigns on Pinterest, reaching over 500 million monthly active users.

This partnership advances our missions to empower global enterprise brands to deliver seamless shopping experiences and engage with consumer-ficking inspiration and a positive online shopping environment. We're thrilled to see customers such as Wirpal, Blindstone, and Easy are ready to leverage Impinterest catalog to enhance their customer journey from inspiration to action.

Speaker Change: This partnerships advances on missions joined power global enterprise brands to deliver seamless shopping experiences and engage with consumers.

Speaker Change: King inspiration and the positive online shopping environment.

Speaker Change: We're thrilled to see customers such as Grupo Brian extend and he's already leveraging pinterest catalog to enhance the customer journey from inspiration to action.

Geraldo Thomaz: We're thrilled to see customers such as Whirlpool, Blindstand, and Easy already leveraging Printer's Catalog to enhance their customer journey from inspiration to action. Security remains a priority as we grow our network and widen our geographical footprint. This strategic move aimed to connect its existing merchants, most of whom were Vitex customers, and enable them to use other payment methods via a mobile app. Choose is leveraging Vitex out-of-the-box features such as Marketplaces, Teleportal, OMS, and Vitex I.O.

Speaker Change: Security remains a priority as we grow our network and widen our geographical footprint in the world where data is as valuable as gold the acuity will only grow in importance, especially as complementing force regulations and set mandatory securities.

Geraldo Thomaz: Security remains a priority as we grow our network and widen our geographical footprint. In the world where data is as valuable as gold, security will only grow in importance, especially as governments enforce regulations and set mandatory security standards for providers. That said, we proudly announce that VTEC has achieved the ISO 27001 certification, which provides an international standard framework and guidelines for establishing, implementing, and managing an information security management system. This certification represents another step in our security journey and highly reaffirmed our commitment to supporting and providing peace of mind to our customers.

Speaker Change: <unk> provides us.

Speaker Change: As said, we proudly announce that <unk> has achieved ISO 27001 certification, which provides an international standards and guidelines for establishing implementing and managing and information security management system.

Speaker Change: At this stage to vacation represents another stat.

Speaker Change: Security journey, and highly reaffirms, our commitment to supporting and providing peace of mind to our customers.

Geraldo Thomaz: Before moving to the financial section, I would like to share some customer scales with you to illustrate more tangibly why enterprises would, why that are choosing VTECs and how we are partnering with them to streamline their operations. By now, pay later payment methods provided in Colombia decided to expand its business, becoming a marketplace with the VTECs platform. This strategic move aimed to connect its existing motions, most of whom were VTECs customers, and enabled them to use our payment methods via a mobile app. The new platform has over a million customers and is built using our robust market-based architecture with both VTECs and no VTEC sellers integrated through the seller portal.

Speaker Change: Before moving to the financial section I would like to share some customers case with Youtube illustrates more tangibly, while enterprises worldwide are choosing <unk> and how we are partnering with them to streamline their operations.

Speaker Change: A buy now pay later payment method provided in Colombia.

Speaker Change: I did to expand its business.

Speaker Change: <unk> marketplace with the detect Spotify.

Speaker Change: Dziedzic move aimed to connect it.

Speaker Change: Existing motions, most of whom will be Texas customers and enable them to use as its payment methods via a mobile app.

Speaker Change: The new platform has over a million customers and it's built using a robust market based architecture with Wolfe vitek and known Vitek sellers integrated crude this tetlow portal.

The project was also developed using our authentication protocol integrated with a third-party identity provider, VTECs IO Store framework and analytics integration with Amplitudes. Additionally, the ad payment connector is certified through the payment protocol. The implementation completed in less than four months delivered impressive results in the first three months of operations, enhancing Azure's market presence and driving significant growth.

Speaker Change: <unk> was also developed using Iot application protocol integrated with a third party, providing the TEG <unk> store framework and analytics integration with amplitudes.

Speaker Change: Additionally, DRG payments connector is certified for the payment protocol the implementation completed in less than four months delivered impressive results in the first three months of operations enhancing as its market presence and driving significant growth.

Speaker Change: Choose in Australia, and Dis's approve disability equipment and supplies distributor dedicated to supporting <unk> with Vista.

Geraldo Thomaz: Choose an Australian NDIS approved disability equipment and supplies distributor dedicated to supporting individuals with disabilities and agents of Australians has launched its marketplace partner with VTECs. Choose is leveraging VTECs out of the box features such as market places, teleportal, OMS and VTECs IO to facilitate its digital business expansion. with a growing network of 134 sellers and a catalog of over 18,000 products. The marketplace architecture empowers customers with seamless product comparisons and the ability to purchase from multiple local sellers simultaneously. By leveraging the VitexIO I-PASS solution, choose successfully implemented, customized and NDIS friendly invoicing for purchases from multiple shops, including all necessary data for claiming, simplifying the claiming process and reducing the likelihood of delays and rejections.

Speaker Change: <unk>, Australia has launched its marketplace button with the text.

Speaker Change: <unk> is leveraging with tax out of the blocks features such as marketplaces.

Speaker Change: Porto <unk> to facilitate its digital business expansion.

Geraldo Thomaz: to facilitate its digital business expansion. Cosmo Music, a leader in musical instrument rental in Canada, recently completed the migration of their rental business from a highly customized legacy platform to Vitax. The migration to VTACS has ensured a seamless and uninterrupted customer journey, maintaining service consistency. Additionally, and aligned with our firm commitment to our customers, Cosmos Rentals highlighted that VITAS Professional Services team has been unparalleled.

Speaker Change: With a growing network of 134 sellers in our catalog.

Speaker Change: 18000 products.

Speaker Change: Marketplace architecture empowers customers with seamless product comparisons and then the ability to choose from multiple local sellers simultaneously.

Speaker Change: By leveraging the textile ipass solution choose successfully incremented customize it and Gis friendly invoicing for chase's from multiple shops, including all necessary data for claiming simplifying.

Speaker Change: The claims process and reducing the lag.

Speaker Change: Ladies and rejection.

Additionally, a feature to include membership and subscription services for key products is under implementation. Choose ends to set a new benchmark in disability and aged care shopping, focusing on expanding its product range and diversity on the platform to attract more customers and boost revenue. We are excited to partner with Choose on their journey to becoming leaders in the sector, helping them to leverage their expertise by providing a seamless, transparent, and accessible shopping experience to their customers.

Speaker Change: Additionally, a feature to include membership and subscription services for key product is under implementation.

Speaker Change: Choose aims to set a new benchmark in just the ability and aged cash choppy.

Speaker Change: Casino and expanding its product range and diversity of the platform to attract more customers and boost revenue.

Speaker Change: We are excited to partner with choose on their journey to become leaders in this sector, helping them to leverage their expertise by providing a seamless transparent and accessible shopping experience to their customers.

Geraldo Thomaz: Cosmo Music, a leader in musical instruments rental in Canada, recently completed the migration of the rental business from a highly customized and legacy platform to VitexIO. This strategic move was driven by the need to enhance operational efficiency, streamline the checkout process, and provide greater control over rental contracts. The migration to Vitex has ensured the seamless and uninterrupted customer journey, maintaining service consistency. Following the migration, Cosmo Rentals has achieved the stable numbers of rental orders year over year and outstanding outcome during the transition periods. The migration included implementing advanced features such as a seamless one-page checkout and headset rental management capabilities, and intuitive interfaces for managing business rules and customers' journeys.

These improvements have enabled Cosmo Music to better serve its diverse customer base, including students, parents, educators, and organizations, while laying a solid foundation for future growth and adaptability. Additionally, in line with our firm commitment to our customers, Cosmo Rentals highlighted that Vitex' professional services team has been unparalleled. Line unmuted.

Speaker Change: Educators and organizations, while laying a solid foundation for future growth and adaptability.

Speaker Change: Additionally, in the line with a firm commitment to our customers Cosmos rentals was highlighted that with tax professional services teams has been parallel line and muted.

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Speaker Change: Hi can I get the spelling of your first and last name.

Operator: Hi, can I get the spelling of your first and last name?

Speaker Change: Hello.

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Speaker Change: Hello.

Geraldo Thomaz: Kapulskis. By partnering with VTACS, GR experienced more than 100% year-over-year orders spike in the first half of 2024, directly attributed to the seamless integration of the physical and non-line channels. Leveraging VTACS expertise and adaptable solutions, GR effectively navigated the complexity of digital transformation and successfully expanded to Argentina with plans to broaden the reach to new markets across Latin America. The collaboration with VTACS empowered GR to deliver a unified, common experience, ensuring consistency and excellence across all touch points, whether online or offline. Dotto, a marketplace for electronic devices, has expanded its reach through its integration with the VTACS platform and ecosystem in Mexico, enhancing usability and user experience.

Speaker Change: Capabilities.

Speaker Change: By partnering with the tax G or experienced more than a 100% year over year or this spike in the first half of 2024 directly attribute that to the seamless integration of the physical and online channels.

Speaker Change: Leveraging <unk> expertise and adaptable solutions youre effectively navigate the complexity of these two transformation and successfully expanded to Argentina, which plans to broaden the reach to new markets across Latin America.

Geraldo Thomaz: The collaboration with the techs empowered Dior to deliver a unified commerce experience, ensuring consistency and excellence across all touchpoints, whether online or offline. Its innovative double-by-box offering save time and save money delivery options has increased user interaction and loyalty, resulting in a 19% boost in product conversion. With this FIO, DOTO can manage its infrastructure natively, focusing on user experience, leading to a 27% increase in site visibility and a 26% rise in visits from returning users.

Dotto can now effectively measure and improve its conversion rates by leveraging VTACS components, such as AB testing and work spaces. It's innovative, double by box, offering save time and save money delivery options has increased user interaction and loyalty, resulting in a 19% boosting product conversions. With VTACS IO, Dotto can manage its infrastructure natively, focusing on user experience, leading to a 27% increase in site visibility and a 26% rise in visits from returning users. Additionally, Dotto benefits from VTACS' omnichannel strategy, adopting the VTACS sales app and, more recently, VTACS intelligent search. These advancements have established Dotto as a leader in the comments, ensuring a balance between logistical efficiency and customer satisfaction.

Geraldo Thomaz: His advancements have established Dotto as a leader in e-commerce, ensuring a balance between logistical efficiency and customer satisfaction. Ajeas Seguro, the largest insurance provider in Belgium and a leader in 14 other countries, has launched a new health and wellness marketplace in Portugal under their MAGIS brand, partnering with the. Additionally, by using the Vitek Seller Portal, AGEA Seguros Portugal can now efficiently onboard sellers, ensuring a quick and straightforward process.

Geraldo Thomaz: Ajayas Segura, the largest insurance provider in Belgium and the leader in 14 other countries, has launched a new health and wellness marketplace in Portugal under their magic brands, partnering with VTACS. They chose us for our unique native marketplace capability and robust front end features, including the store framework and the optimized checkout flow. These were crucial for integrating multiple payment protocols, including its own payment methods and various gift cards options. Additionally, by using the VTACS seller portal, Ajayas Segura's Portugal can now efficiently onboard sellers, ensuring a quick and straightforward process. We are excited about this partnership and eager to help them create an innovative healthcare ecosystem.

Speaker Change: <unk> health and wellness market basically Portugal under their magic spreads partnering with pretax.

Speaker Change: Chose us for our unique native marketplace capability and robust front end features including the store framework and optimize the checkout flow.

Speaker Change: These were crucial for integrating multiple payment protocols, including its own payment method and various gift cards options.

Speaker Change: Additionally, by using the <unk> portal.

Speaker Change: <unk>, Portugal can now efficiently onboard sellers, ensuring a quick and straightforward process.

Speaker Change: We are excited about this partnership and eager to help them create an innovative health care ecosystem.

Speaker Change: H Mart, the largest Asian supermarket chain in the U S migrated cheville tax launching two new online stores. After seven months transition from the legacy platform by migrating H March start to consolidate the previously separate.

H-Mart, the largest Asian supermarket chain in the U.S., migrated to VTX, launching two new online stores after seven months' transition from the legacy platform. By migrating, H-Mart starts to consolidate the previously separated systems for perishable and non-pressible items with its fresh, good systems, creating a unified commerce experience. Now, consumers are able to order from all product categories at the same cards and while also leveraging store inventory to provide real-time availability information and facilitate efficient delivery strategies. In the second quarter, H-Mart initiated the integration process for its physical grocery stores, beginning with the California locations. H-Mart's commerce capabilities have already witnessed significant enhancements, incorporating features such as VTX Peacampac app for seamless install order peeking and precise product visibility control based on customer location, preferred size accounts, and trade policies functionality.

Speaker Change: Systems for perishable and non perishable items with its fresh good systems create.

Speaker Change: Creating a unified commerce experience now.

Geraldo Thomaz: HMOD's commerce and e-commerce capabilities have already witnessed a significant enhancement, incorporating features such as Vitek's Pick and Pack app for seamless in-store order picking and precise product visibility control based on customer location for franchise accounts and trade policies functionality. On top of that, the architecture also integrates with HMAR's year-round PIV category inventory and pricing, tax automation, and payment process. We're excited to accompany H-Mart on their digital transformation and their path to strengthening their market share in the U.S.

Geraldo Thomaz: On top of that, the architecture also integrates with H-Mart's year, beautiful category inventory and pricing, text automation, and payment processing. With over 90 locations across the U.S., this strategic move positions H-Mart to deliver a superior omni-channel shopping experience, both online and offline. We're excited to accompany H-Mart on their digital transformation and their path to strengthening its market share in the U.S.

Libert is granted a leading bookstore chain in Mexico with 49 physical stores and a central distribution center partner with VTX to enhance their omni-channel capabilities. They aim to integrate the extensive inventory of 4.5 million SKUs, including physical and digital products, across all sales channels. This integration enabled sales and inventory management from each store and incorporated in-store pickup. Leveraging VTX architecture, Gandhi could offer same-day delivery in Mexico City, prioritizing distribution and delivery from the central distribution center and extended their sales reach through market-based integrations with Walmart, Mexico, and Mercado Libert. Additionally, we're developing the sales integrations with Palacio de Yejo, Mexico's premier luxury department stores and building the capabilities to manage international deliveries from their central distribution centers.

Speaker Change: The aim to integrate their extensive inventory of $4 5 million skus, including physical and digital products across all sales channels. This integration enabled sales and inventory management from each store and incorporate that in <unk>.

Geraldo Thomaz: They aim to integrate the extensive inventory of 4.5 million SKUs, including physical and digital products, across all sales. Leveraging Vitex architecture, Gandhi could offer same-day delivery in Mexico City, prioritizing distribution and delivery from the central distribution center, and extended their sales reach through marketplace integrations with Walmart Mexico and Mercado Libre. With its tax-added network, scalable, and performance-driven approach, PagManus is poised to capitalize on emerging trends and drive further growth in the future.

Speaker Change: Or pickup.

Speaker Change: Leveraging detects architecture Guernsey could offer same day delivery in Mexico City.

Speaker Change: <unk> distribution and deliveries delivery from the central distribution center and extended their sales reach through marketplace integrations with Walmart, Mexico enrolled and mezcal deliberate.

Speaker Change: Additionally, we are developing the sales integrations with philosophy year, Mexico Premier luxury department stores and building the capabilities to manage international deliveries from the Central distribution Center.

Geraldo Thomaz: Last but not least, Pagi Menos, a leading pharmacy retail chain in Brazil, recognized the pivotal role of retail media as the next frontier in advertising. By using Vitex ads network, Pagi Menos efficiently manages its advertising space, space seamlessly aligning advertiser promotions with consumer behavior to drive sales. All without the burden of managing numerous separate advertisers' relationships. This integration expanded the reach, opened new sales channel, and delivered immediate increasing sales and revenue. Why, on the other hand, it boosted advertiser performance metrics and roles with Vitex ads network's scalable and performance-driven approach. Pagi Menos is supported to capitalize on emerging trends and drives for the growth in the future.

Speaker Change: Last but not least bogeyman was a leading pharmacy retail chain in Brazil recognized that the five little role of retail media is the next frontier in advertising by using the tax AD network bagman efficiently manages its advertising space.

Geraldo Thomaz: To finalize this discussion, I'd like to express my gratitude to our 1,339 dedicated Vitex employees whose commitment, passion, and execution do not go unnoticed. I also want to thank your customers, partners, and investors who support us on this journey and help shape our story. We have a clear vision and a challenging yet rewarding purpose to become the backbone of connected commerce. Let's make it happen.

Geraldo Thomaz: To finalize this session, I'd like to express my gratitude to our 1,339 dedicated VITAX employees whose commitment, passion, and execution do not go unnoticed. I also want to thank our customers, partners, and investors who support us on this journey and help shape our story. We have a clear vision and a challenging yet rewarding purpose to become the backbone of a connected community. Let's make it happen. Now, I will hand the call over to Ricardo. Thank you.

Ricardo Camata Sabre: Now, I will hand the call over to Ricardo. Thank you, Gerardo.

Ricardo Sodre: Thank you, Geraldo. Hi everyone.

Ricardo Camata Sabre: Hi, everyone. I'm pleased to share Vitex Q2 2024 financial results. As Gerardo highlighted, our Q2 GMV reached $4.4 billion, marking a year-over-year growth of 15.6% in US dollars and 19.4% in effect neutral. Revenue stood at $56.5 million, representing a year-over-year increase of 18.1% in US dollars and 21.9% on an effect-neutral basis. The overperformance versus our guidance was primarily driven by stronger revenue performance from existing customers, positive outcomes from retailers' promotional events, cross-selling from add-ons, and a robust contract signature momentum. We are encouraged by our prospects and aim to build more reference cases demonstrating Vitex value proposition.

Ricardo Sodre: I'm pleased to share VTAC's Q2 2024 financial results. As Geraldo highlighted, our Q2 GMV reached $4.4 billion, marking a year-over-year growth of 15.6% in U.S. dollars and 19.4% in FX neutral. Revenue stood at $56.5 million, representing a year-over-year increase of 18.1% in US dollars and 21.9% on an FX-neutral basis, positive outcomes from retailers' promotional events, cross-selling from add-ons, and robust contract signature momentum. We are encouraged by our prospects and aim to build more reference cases demonstrating VTAC's value proposition. As Geraldo briefly mentioned, our profitable growth strategy is making strides. Two years ago, in Q2 2022, informed by the macro scenario and the opportunities ahead, we started optimizing our organizational structure.

As Gerardo briefly mentioned, our profitable growth strategy is making strides.

Speaker Change: In our profitable growth strategy is making strides.

Ricardo Camata Sabre: Two years ago, in Q2 2022, informed by the macro scenario and the opportunities ahead, we started optimizing our organization structure. The very next quarter, Q3 2022, we were already delivering a year-over-year improvement of 26 percentage points in our non-GAAP operating income margin. Just a year later, by Q2 2023, we further accelerated our operating margin expansion, reaching a peak of 42 percentage points. As we lap these initial adjustments, the year-over-year margin gain has been more moderated, still remaining at around 15 percentage points over the last three quarters.

Speaker Change: Two years ago in Q2, 2022 informed by the macro scenario and the opportunities ahead, we started optimizing our organizational structure.

Speaker Change: The very next quarter Q3, 2022, we were already delivering a year over year improvement of 26 percentage points in our non-GAAP operating income margin.

Ricardo Sodre: The very next quarter, Q3 2022, we were already delivering a yield improvement of 26 percentage points in our non-gap operating income margin. Just a year later, by Q2 2023, we further accelerated our operating margin expansion, reaching a peak of 42 percentage points. As we have lapped these initial adjustments, the year-over-year margin gain has been more moderated, still remaining at around 15 percentage points over the last three quarters

Speaker Change: Just a year later by Q2 2023, we further accelerated our operating margin expansion, reaching a peak of 42 percentage points.

Speaker Change: As we lap these initial adjustments the year over year margin gains has been more moderated still remaining at around 15 percentage points over the last three quarters.

Reuters. Most importantly, throughout this period of eight quarters, our FX neutral e-over-year revenue growth has remained between 20% and 25%, demonstrating sustainable and out-profitable growth. We rate our commitment to profitable growth. We are making steady progress towards reaching back the rule of 40, our guiding financial principle. We will continue to evaluate our revenue growth and investment levels, adjusting to the level of demand, sales conversion rates, and return of investments to build the highest possible long-term value. Going back to our Q2P&L, our subscription revenue reached $54.0 million this quarter, up from $44.8 million in the second quarter of 2023, representing a year-over-year increase of 20.6% in US dollars and 24.7% in FX neutral, while our services revenue totaled $2.6 million.

Speaker Change: Most importantly throughout this period of eight quarters, our FX neutral year over year revenue growth has remained at between 20% and 25%.

Ricardo Sodre: Most importantly, throughout this period of eight quarters, our FX-neutral year-over-year revenue growth has remained between 20% and 25%, demonstrating sustainable and now profitable growth. We reiterate our commitment to profitable growth. We are making steady progress towards reaching back the Rule of Forty, our guiding financial principle.

Speaker Change: <unk> sustainable and profitable growth.

Speaker Change: We reiterate our commitment to profitable growth, we are making steady progress towards reaching back the rule of 40, our guiding financial principle.

Ricardo Sodre: We will continue to evaluate our revenue growth and investment levels, adjusting to the level of demand, sales conversion rates, and return on investments to build the highest possible long-term value. Now, going back to our Q2 P&L. Our subscription revenue reached $54.0 million this quarter, up from $44.8 million in the second quarter of 2023, representing a year-over-year increase of 20.6% in U.S. dollars and 24.7% in FX mutual funds, while our services revenue totaled $2.6 million.

Ricardo Camata Sabre: Over the past few years, our commitment to driving efficiency has led to notable improvements in our subscription growth margin. Initially, we focus on foundational steps, such as monitoring cloud investments and establishing a culture of efficiency to reduce cost and enhance resilience. These efforts, which include migrating microservices to more efficient solutions, set the stage for advanced measures that could generate further improvements. For example, we are enhancing API consumption data's precision, allowing for better allocation of infrastructure costs and identifying efficiency gains. Additionally, we are refining our approach to measure API consumption by latency, enabling a more accurate assessment of resource intensity and actable cost sharing.

Ricardo Sodre: Over the past two years, our commitment to driving efficiency has led to notable improvements in our subscription gross margin. Initially, we focused on foundational steps such as monitoring cloud investments and establishing a culture of efficiency to reduce costs and enhance resilience. These efforts, which include migrating microservices to more efficient solutions, set the stage for advanced measures that could generate further improvement. For example, we are enhancing API consumption data's precision, allowing for better allocation of infrastructure costs and identifying efficiency gains. Additionally, we are refining our approach to measure API consumption by latency, enabling a more accurate assessment of resource intensity and actable cost sharing.

These initiatives empower us and our customers to make informed, efficiency-driven decisions that support our financial goals and enhance our competitive advantage. As a result, our non-GAAP subscription growth margin has reached 78.1%, a 285 basis points e-over-year improvement compared to the 75.3% margin in the same quarter last year. On top of that, our overall non-GAAP growth margin, this quarter, also improved significantly, reaching 74.0%, a 597 basis points improvement from the 68.0 margin in the second quarter of 2023. Our efforts to build an ecosystem of system integrators and partners globally are enabling us to scale more efficiently.

Ricardo Sodre: These initiatives empower us and our customers to make informed, efficiency-driven decisions that support our financial goals and enhance our competitive advantage. As a result, our non-GAAP subscription gross margin reached 78.1%, a 285 basis points year-over-year improvement compared to the 75.3% margin in the same quarter last year. On top of that, our overall known gap gross margin this quarter also improved significantly, reaching 74.0 percent, a 597 basis points improvement from the 68.0 margin in the second quarter of 2023. Our efforts to build an ecosystem of system integrators and partners globally are enabling us to scale more efficiently.

Ricardo Camata Sabre: Our ecosystem has allowed our new customers in the US and Europe to rely less on the right services from VTACs, which in many cases were sold at a loss to onboard our initial larger customers in these regions. Consequently, our non-GAAP growth profit had a year-over-year increase of 28.4% in US dollars and 33.6% in FX neutral in the second quarter of 2024. Our non-GAAP total operating expenses reached $35.4 million in the second quarter of 2024. Up from $35.1 million in the prior quarter and $34.1 million in the same period last year. Although a net positive one-off of almost $1 million reduced our expense to this quarter, total expenses have remained relatively stable throughout 2023 and the first half of 2024, reflecting our ongoing operational average.

Ricardo Sodre: Our ecosystem has allowed our new customers in the U.S. and Europe to rely less on direct services from VTAC, which in many cases were sold at a loss to onboard our initial larger customers in these regions. Consequently, our non-GAAP gross profit had an annual-over-year increase of 28.4% in US dollars and 33.6% in FX neutral in the second quarter of 2024. Our non-GAAP total operating expenses reached $35.4 million in the second quarter of 2024, up from $35.1 million in the prior quarter and $34.1 million in the same period last year.

Speaker Change: Again in the second quarter of 2024 up from $35 1 million in the prior quarter and $34 1 million in the same period last year.

Speaker Change: Although our net positive one off of almost $1 million reduced our expense. This quarter total expenses have remained relatively stable throughout 2023, and the first half of 2024, reflecting our ongoing operational leverage.

Ricardo Sodre: Although a net positive one-off of almost $1 million reduced our expenses this quarter, total expenses have remained relatively stable throughout 2023 and the first half of 2024, reflecting our ongoing operational efforts. As a result, our non-GAAP operating income improved from a negative 3.2% margin in the same quarter last year to a positive 11.3% margin this quarter. With expenses increasing only slightly year over year, the significant 15 percentage point margin improvement is primarily driven by revenue growth with operational leverage and sustainable gross margin improvement.

As a result, our non-GAAP operating income improved from a negative 3.2% margin in the same quarter last year to a positive 11.3% margin this quarter. With expenses increasing only slightly over year, the significant 15 percentage points margin improvement is primarily driven by revenue growth, with operational leverage and sustainable gross margin improvements.

Speaker Change: As a result, our non-GAAP operating income improved from a negative three 2% margin in the same quarter last year.

Speaker Change: So a positive 11, 3% margin this quarter.

Speaker Change: With expenses, increasing only slightly year over year. The significant 15 percentage points margin improvement is primarily driven by revenue growth with operational leverage.

Speaker Change: And sustainable gross margin improvements.

Ricardo Camata Sabre: Before going to our guidance for the next quarter and the full year 2024, let me highlight that, in the fourth consecutive quarter, V-tax generated cash. As of the three months ended June 30, 2024, we had a positive $3.2 million free cash flow on top of a positive $1.9 billion on Q1 2024 and up from a negative $3.3 million free cash flow in the second quarter of last year. Looking ahead, despite the uncertain macroeconomic conditions, we remain encouraged by our sales momentum and operational leverage. From a revenue perspective, for the third quarter of 2024, we are targeting FX neutral e-over-year revenue growth of 18% to 20% in applying a 56.0 to 57.0 million dollar range.

Speaker Change: Before going to our guidance for the next quarter and the full year 2024, let me highlight that in the fourth consecutive quarter <unk> generated cash.

Ricardo Sodre: Before going to our guidance for the next quarter and the full year 2024, let me highlight that for the fourth consecutive quarter, VTACs generated cash. As of the three months ended June 30, 2024, we had a positive $3.2 million free cash flow, on top of a positive $1.9 billion in Q1, 2024, and up from a negative $3.3 million free cash flow in the second quarter of last year. Looking ahead, despite the uncertain macroeconomic conditions, we remain encouraged by our sales momentum and operational leverage.

Speaker Change: As of the three months ended June 32024, we had a positive $3 2 million free cash flow on top of a positive $1 9 billion on Q1 2024.

Ricardo Sodre: From a revenue perspective, for the third quarter of 2024, we are targeting FX-neutral year-over-year revenue growth of 18% to 20%, implying a $56.0 to $57.0 million range. For the full year 2024, we will continue to execute our profitable growth strategy. We are increasing our FX-neutral year-over-year revenue growth target to 18% to 20%, implying a range of $231 to $235 million based on July's average FX rate. We are also raising our free cash flow and non-GAAP operating income margins targets to a range of high single digits to low teens.

For the full year 2024, we will continue to execute our profitable growth strategy. We are increasing our FX neutral e-over-year revenue growth target to 18% to 20% in applying a range of 231 to 235 million dollars based on July's average FX rate. We are also raising our free cash flow and non-GAAP operating income margins target to a range of high single digits to low teams. V-Tax continues to operate from a position of strength, propelled by robust sales momentum. Our solid business model, coupled with recognition from industry analysts, customers, and partners, underpins a prosperous growth opportunity.

Ricardo Sodre: Vitex continues to operate from a position of strength, propelled by robust sails momentum; our solid business model, coupled with recognition from industry analysts, customers, and partners underpins a prosperous growth opportunity. As we move forward, our focus remains on execution and delivering long-term value to our customers, partners, and investors. We look forward to continuing this journey together, maintaining a rentless commitment to operational access. With that, let's open it up to questions now. Thank you.

Ricardo Camata Sabre: As we move forward, our focus remains on execution and delivering long-term value to our customers, partners, and investors. We look forward to continuing this journey together, maintaining a rental as a commitment to operational excellence.

Operator: With that, let's open up for questions now. Thank you. You will now begin the question and answer session.

Operator: Thank you. We will now begin the question and answer session. If you've dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you'd like to withdraw your question, simply press star one again. If you're 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. Again, press star 1 to join the queue. Our first question comes from Marcelo Santos with J.P. Morgan. Please go ahead.

If you've had to raise your hand and join the queue. If you'd like to withdraw your question, simply press start one again.

If you're 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.

Christian. Again, press star one to join the queue.

Marcelo Santos: Our first question comes from Marcelo Santos with JP Morgan. Please go ahead.

Marcelo Santos: Hi, good evening to all the VTech team. Thanks for letting me ask you questions. I have two.

Hi, good evening to all the Vitex team. Thanks for Latimi-esque questions. I had to. The first question is if you could please discuss the main elements that led to the revision of the growth and profitability guidance. Maybe you can break into parts and explain what's coming better. And the second question is, you're getting pretty close to your target model, like when you look especially on the growth margins there, evolving very quickly. What's next? What's beyond the target model?

Marcelo Santos: The first question is, if you could please discuss the main elements that led to the revision of the growth and profitability guidance. Maybe you can break it into parts and explain what's coming better. And the second question is, you're getting pretty close to your target model, like when you look especially at the gross margins, they're evolving very quickly. What's next? What's beyond the target model? Thank you very much.

Thank you very much.

Ricardo Camata Sabre: Hi, Marcelo. Thanks, thanks for this. So, as highlighted in our paper remarks, we saw a strong performance from our existing customers and a robust momentum in new contract signatures from new customers, which exceeded our expectations in Q2 and prompted us to increase our FX-neutral, full-year revenue guidance. Additionally, our profitable growth strategy has enabled us to also raise our non-GAAP operating income and free cash flow margin in targets from high single digits last quarter to a range of high single digits to low teens now.

Ricardo Sodre: Hi Marcelo, thanks for this. As highlighted in our prepared remarks, we saw a strong performance from our existing customers and robust momentum in new contract signatures from new customers, which exceeded our expectations in Q2 and prompted us to increase our FX-neutral full-year revenue guidance. Additionally, our profitable growth strategy has enabled us to also raise our non-gap operating income and free cash flow margin targets from high single digits last quarter to a range of high single digits to low single digits now.

As a quick side note to explain our financial mindset, at the beginning of the year, our implied rule of 40 guidance was in the mid-twenties with an 18 to 22% effect neutral growth and mid single digit margin guidance. Now, with 18 to 20% growth and high single digit to low teams margin guidance, our implied rule of 40 is in the high 20s to low 30s. This is a significant improvement and a demonstration of the Rule of 40 as our financial guiding principle. Further on Q3 and 2024 guidance and on your question on the assumptions and how we're thinking about it, we are assuming similar operational KPIs for Q3 and awards versus what we saw in Q2.

Ricardo Sodre: As a quick side note to explain our financial mindset, at the beginning of the year, our implied rule of 40 guidance was in the mid-20s, with an 18 to 22% FX neutral growth and mid-single digit margin guidance. Now with 18 to 20% growth and high single digit to low double digit to low triple digit margin guidance, our implied rule of 40 is in the high 20s to low 30s. This is a significant improvement and a demonstration of the Rule of Forty as our financial guiding principle.

Ricardo Sodre: Further, on Q3 and 2024 guidance, and on your question about the assumptions and how we're thinking about it, we are assuming similar operational KPIs for Q3 and onwards versus what we saw in Q2. The slightly lower year-over-year growth implied for the second half of the year can be explained by Tuffer Comp. As a quick reminder, last year we grew 22% and 23% in Q1 and Q2, and about 25% in both Q3 and Q4. Therefore, when we analyze it at a two-year CAGR, the FX-neutral growth rates of the first and second halves of 2024 are quite similar.

Speaker Change: <unk> your question on the assumptions and how we're thinking about it.

Speaker Change: We are assuming similar operational kpis.

Speaker Change: For Q3 and awards versus what we saw in Q2.

They is lightly lower e-over-year growth implied for the second half of the year can be explained by tougher comps. As a quick reminder, last year we grew 22% and 23% in Q1 and Q2 and about 25% in both Q3 and Q4. Therefore, when we analyze in a two-year cager, the effects neutral growth rates of the first and second half of 2024 are quite similar. Quickly on effects for the second half of the year, by basing our guidance on July's average effects rates, we have included a greater effect impact in our guidance for the remainder of the year.

Speaker Change: <unk> is slightly lower year over year growth implied for the second half of the year can be explained by tougher comps.

Speaker Change: As a quick reminder, last year, we grew 22 and 23% in Q1 and Q2.

Speaker Change: And about 25% in both Q3 and Q4.

Speaker Change: Therefore, when we analyze in a two year CAGR the FX neutral growth rate of the first and second half soft 'twenty 'twenty four are quite similar.

Ricardo Sodre: Quickly on effects, for the second half of the year, by basing our guidance on July's average effects rates, we have included a greater effects impact in our guidance for the remainder of the year. But, as you probably noted, we have only adjusted the implied midpoint of our revenue guidance for the year by 2%. So, this softening of the FX impact is possible given the strong operational momentum we are witnessing. We expect to offset some of the FX impacts by delivering higher operational slash FX-neutral growth.

Speaker Change: Quickly on FX for the second half of the year by basing our guidance on July's average FX rates. We have included a greater FX impact in our guidance for the remainder of the year.

Weighted average by our basket of currencies, they imply effects devaluation for the second half since our previous earnings report is roughly 6%. But, as you probably noted, we have only adjusted the implied midpoint of our revenue guidance for the year by 2%. So this softening of the effects impact is possible given the strong operation of momentum we are witnessing. We expect to offset some of the effects effects by delivering higher operational slash effects neutral growth. As per our guidance, our effects neutral growth outlook has increased to 18% to 20%, an increase of 1% point in the middle of the range.

Weighted average by our basket of currencies.

Speaker Change: They imply FX devaluation for the second half.

Speaker Change: Since our previous earnings report is roughly 6%.

Speaker Change: But as you probably noted we have only adjusted the implied midpoint of our revenue guidance for the year by 2%.

Speaker Change: So the softening of the FX impact is possible given the strong operational momentum we are witnessing.

Speaker Change: We expect to offset some of the FX impacts effects by delivering high year operation always lash FX neutral growth.

Ricardo Sodre: As per our guidance, our FX-neutral growth outlook has increased to 18% to 20%, an increase of one percentage point in the middle of the range. And it is also important to mention that, you know, services in Argentina have each been a couple of percentage points a headwind on our year-over-year total revenue growth. On the services side, we see it as a positive that our global ecosystem matures and we need to invest less in services, which is accretive to our borrowed mind. Regarding Argentina, we understand that this is a temporary and necessary macro adjustment for the country.

And also important to mention that those services in Argentina have each being a couple of percentage points headwind on our e-over-year total revenue growth. On the services side, we see it as a positive that our global ecosystem matures and we need to invest last on services, which is acquitted to our borrow line. And regarding Argentina, we understand that this is a temporary and necessary macro adjustment for the country.

And finally, we remain encouraged by the strong operational momentum, competitive position, and long-term growth potential of our business. And we will continue to monitor the uncertain macro scenario and keep you informed of any relevant changes in our business. So this was the answer on the guidance in your first question.

Ricardo Sodre: And finally, we remain encouraged by the strong operational momentum, competitive position, and long-term growth potential of our business. We will continue to monitor the uncertain macro scenario and keep you informed of any relevant changes in our business. So this was the answer to the guidance in your first question. Could you repeat, please, the second question, Marcelo? Perfect. Thank you for the first answer.

Ricardo Camata Sabre: Could you repeat, please, the second question, Marcelo? Perfect, thank you for the first answer. The second question is that you are getting pretty close to the target model, especially on the growth margin, but in general.

Ricardo Sodre: The second question is that you're getting pretty close to the target model, especially on the gross margin, but in general. So my question was kind of, what's next? Yeah, happy to start and others to chime in.

So my question was kind of what's next?

Yeah, happy to start and others to chime in. So, Marcelo, as you can note, we have made relevant improvements in our overall growth margin, reaching 74% overall growth margin versus the target model of 75%. And on the subscription growth margin, we reached 78% versus the 80% of the target model.

Ricardo Sodre: So, Marcelo, as you can see, we have made relevant improvements in our overall gross margin, reaching 74% overall gross margin versus the target model of 75%. And on the subscription gross margin, we reached 78% versus the 80% of the target model. We issued the target model at our investor day last year, and we mentioned it was a mid-term target, like three to five years. We have lapped the investor day already. So it's been a year since that.

We issued the target model in our investor day last year, and we mentioned it was a mid-term target like three to five years. We lapped the investor day already, so it's been a year since that, so now two to four years. And we have been positively surprised by our progress on the margin side, and we continue to go after this target model target. Once we are closer to it or we have more visibility on potential next steps, we will inform the market, but we are still working our way towards this target model of 80% subscription growth margin and 75% overall growth margin.

Ricardo Sodre: So now, two to four years later, and we have been positively surprised by our progress on the margin side. And we continue to, you know, go after this target model. Once we are closer to it, or we have more visibility on potential next steps, we will inform the market, but we are still working our way towards this target model of 80% subscription gross margin and 75% overall gross margin.

Thank you, thank you very much.

Diego Kapulski: Our next question comes from a line of Diego Kapolski's with Banco E2, BBA. Please go ahead. Hi, hi, hi everyone. Thanks for the opportunity to make a question. And today I have two on my side as well.

Operator: Our next question comes from the line of Thiago Kapulski. With Banco E2 BBA, please go ahead.

Thiago Kapulskis: Hi, hi, hi everyone. Thanks for the opportunity to ask a question. Actually, I have two on my side as well, first on You guys detailed a little bit about the services part in Argentina, but if you could give us an update about the macro, about what you saw there. We know that the hot sales event was strong, but just want to hear a little bit better about what you see, like the latest data that you have and how you're thinking about the environment there.

First of all, you'd like to take a little bit the services part in Argentina, but if you could give us an update about the macro, about what you saw there. We know the hot sales event was strong, but just want to hear a little bit better what you see like the latest data that you have and how you're thinking about the environment there.

Diego Kapulski: And then the second question, a little bit more broad base about this whole SaaS discussion. As you guys know, we've seen a lot of movements in the U.S. SaaS stocks because of AI and how actually that can change the SaaS business versus the SaaS business? So just wondering how you think about that for the VTEX context, and especially opportunities or threats that you can find in developed markets like the U.S. with all of that. So, thank you.

Thiago Kapulskis: And then the second question, a little bit more broad-based on the whole SAS discussion, as you guys know, we've seen a lot of movements in the U.S. as stocks because of AI, and how can that actually change the SaaS business versus the PaaS business. So, just wondering how you think about that for the VTX context, and especially opportunities or threats that you can find in developed markets like the US with all of that. So, thank you. Yes, hi Thiago, great.

Yes, hi, hi, Thiago. Great. Thanks for the opportunity to share additional details on this topic. So on Argentina, as I mentioned on the guidance, right? Argentina has been a couple of percentage points headwind to our consolidated growth. And as discussing in our previous earnings call predicting the situation, Argentina is always challenging with no clear view of when its macro economic situation and its impact on consumption would improve consumption until April. It was more challenging than anticipated and was getting worse month over month. The second quarter imposed an additional challenge given the hot sales special events is an alley of the country, which is similar to the back Black Friday for Argentina.

Ricardo Sodre: Thanks for the opportunity to share additional details on this topic. So on Argentina, as I mentioned in the guidance, right, Argentina has been a couple of percentage points headwind to our consolidated growth. And, as discussed in our previous earnings call, predicting the situation in Argentina is always challenging, with no clear view of when its macroeconomic situation and its impact on consumption would improve. Consumption until April was more difficult than anticipated and was getting worse month over month.

Ricardo Sodre: Yes. Hi Thiago. Great.

Ricardo Sodre: The second quarter imposed an additional challenge, given the hot sales and special events seasonality of the country, which is similar to Black Friday for Argentina. Once the holiday season in Argentina passed, we felt our guidance for Q2 was de-risked, the event was better than expected across the board, and the Argentine Chamber of E-Commerce shared the market's good results. And we were also glad to see that during the event, our customers overperformed the overall market by a decent margin.

Once hot sales in Argentina passed, we felt our guidance for Q2 was the risk it. The event was better than expected across the board, and the Argentine chamber of newcomers share the market's good results. And we were also glad to see that during the event, our customers overperformed the overall market by a decent margin. And as mentioned before, we are still navigating an uncertain and volatile scenario. In the country, consumption appears to have slightly improved since hot sales in May, partly due to the extended free installment programs, but there are no clear trends to indicate that the country has entered its stabilization or recovery phase.

Ricardo Sodre: And, as mentioned before, we are still navigating an uncertain and volatile scenario in the country. Consumption appears to have slightly improved since the hot sales in May, partly due to the extended free installment programs, but there are no clear trends to indicate that the country has entered its stabilization or recovery phase. With that said, although we are expecting some recovery in the country in the second half versus Q2, Argentina should continue to be a couple of percentage points a headwind in the Vitex consolidated FX neutral year-over-year revenue growth performance.

With that said, although we are expecting some recovery of the country in the second half versus Q2, Argentina should continue to be a couple of percentage points headwind in the VTECs consolidated effects, new through E over year revenue growth performance.

With that, let me pass it over to Gerardo to answer the second question. Sorry.

Ricardo Sodre: With that said, let me pass it over to Geraldo to answer the second question. Oh, sorry. Okay, Thiago, could you repeat the second question? Yeah.

Okay, Thiago, could you repeat the second question? Yes, absolutely. So just wondering if we've been seeing a lot of pressure on fast companies in the U.S. Special Excel or some others. Because of AI, right? So there's been a lot of conversations in the market about both changes, right? In the SaaS business, because of AI, companies are moving more into paths internalizing functions.

Thiago Kapulskis: Yes, absolutely. So just wondering how, because we've been seeing a lot of pressure on fast companies in the US, especially like Salesforce and others, because of AI, right? So, there's been a lot of conversations in the market about changes, right, in the SaaS business because of AI, companies moving more into PaaS, internalizing functions. So, just wondering how you guys at VTechs are thinking about that, positioning the business, or any thoughts, especially regarding the developed markets that you have there.

Speaker Change: About about changes right into the SaaS business, because it'll be eyeing companies moving more into pads internalizing functions. So just wondering how you guys are V. Techs are thinking about that positioning the business, so any thoughts, especially rigs.

Mariano Faria: So just wondering how you guys at VTECs are thinking about that, positioning the business or any thoughts, especially regarding developed market.

Speaker Change: Regarding developed market.

Speaker Change: Instead, you have there.

Yes, so happy to take this one. Mariano here. So AI will change a lot of the foundations for commerce. of the world. But if you break down how it's going to impact, I believe and detects believe that the profitability of the company should be the first target. Marker economic demands the companies to go for it, and the AI should be the instrument of this kind of delivery. The LLM part of the AI's will do a kind of significant impact on the customer service. You can imagine that the customer service varies from 0.5% to 2.5% of the GMV of the retail and brands and that can reduce, maybe.

Marciano: Yes, so happy to take these one marciano here, so I will change a lot of a lot of the foundations for commerce in the world.

Mariano Faria: Yes, so happy to take this one, Mariano here. So AI will change a lot of the foundations for commerce. But if you break down how it's going to impact the company, I believe, and Vitex believes, that the profitability of the company should be the first target. Macroeconomic demands companies to go for it, and AI should be the instrument of this kind of delivery. The LLM part of the AIs will have a kind of significant impact on customer service. I can imagine that customer service varies from 0.5 to 2.5% of the GMV of the retail and brands, and that can reduce, maybe, it's an assumption here, by 50%.

Speaker Change: If you break down how it's going to impact I believe and <unk> believes that the profitability of the company should be the first target microeconomic demands the company to go for it and the AI should be the instruments of these kind of deliver.

Speaker Change: The LLM part of the ice will do.

Speaker Change: Kind of significant impact on the customer service.

You can imagine that the customer service, where is from 0.5 to two 5% of the gym V of the retailers and brands.

Speaker Change: And that can reduce maybe it's an assumption here by 50%.

It's an assumption here by 50%. So AI will deliver some value on the customer service. On the sales itself, all the tools that have predictions will be reinvented. So the search, the front end, everything will be affected by AI. Our bet, VTex bet, is that we're going to leverage the models that are there as infrastructure. So VTEX is happy to explore the models that will be provided by infrastructure companies, like, for example, Senareyes, like, for example, OpenAI, Nvidia, Meta, and we will leverage those models to deliver the best applications to our customers. We address the situation of developing AI pretty close to the goals of providing better revenue and better profitability for our customers.

Mariano Faria: So AI will deliver some value to the customer, to the sales itself, all the tools that have predictions will be reinvented. So the search, the front end, everything will be affected by AI. Our bet, Vitex's bet, is that we're going to leverage the models that are there as infrastructure. So, VTACS is happy to explore the models that will be provided by infrastructure companies, like for example, Cinerise, like for example, OpenAI, NVIDIA, Meta, and we will leverage those models to deliver the best applications to our customers.

Speaker Change: So AI, who will deliver some value on the customer service.

Speaker Change: On the on the sales itself all the tools that our predictions will be reverted so the search the front and everything will be affected by AI.

Speaker Change: Our bet <unk> bet is that we're going to leverage the models that are there as infrastructure.

Speaker Change: So the taxes happy to explore the models that will be provided by infrastructure companies. Like for example, Cinryze like for example, open AI Nvidia matter and we will leverage those models to delivered the best applications to our customers.

Mariano Faria: We addressed the situation of developing AI pretty close to the goals of providing better revenue and better profitability for our customers. We are not deploying a huge amount of capital in AI, although we are moving our R&D to deliver AI products at don'ts to the customer base of

Speaker Change: We addressed the situation also developing AI pretty close to the goals of providing better revenue and better profitability for our customers.

We are not deploying like a huge amount of capital in AI. Although we are moving R&D to delivery AI products at dawns to the customer base of VTex.

Speaker Change: We are not deploying like a huge amount of capital NII, Although we are moving our A&D to delivery AI products at dawn <unk> to the customer base of <unk>.

Speaker Change: Okay.

Geraldo Thomaz: And here, I'm Gerardo here; if I can also add Thiago. I think I can link also this. You said about the expansion in the US, all the changes here that is happening. And when the market moves, there's always opportunities to disruption. There's an opportunity that we will get if we leverage our software through all the scenarios that AI will bring to the consumers. You can imagine people changing the interfaces where they buy. And we can be a very good partner for our customers when they want to change the broader interfaces where people buy. You can see that we always advertise VTEX as an e-commerce platform that also has an OMS that is very close to the e-commerce platform.

Geraldo Thomaz: And here, I'm Geraldo here. If I can also add, Thiago, I think I can link this to what you said about the expansion in the U.S. and all the changes that are happening here. And when the market moves, there's always opportunities for disruption. This is an opportunity that we will get if we leverage our software for all the scenarios that AI will bring to the consumers. You can imagine people changing the interfaces where they shop.

Speaker Change: Yes.

Speaker Change: Geraldo here, if I can also add thiago.

Geraldo: I can link also.

Speaker Change: You said about the.

Speaker Change: Especially in the U S and with all the changes you have.

Speaker Change: And when the market moves.

Speaker Change: As always opportunities to disruption.

Speaker Change: This is an opportunity that we will get if we we leverage our software to all the scenarios that AI will bring to the consumers you can imagine people changing the.

Speaker Change: Interfaces, where they buy and we can be.

Geraldo Thomaz: And we can be a very good partner for our customers when they want to change and broaden the interfaces where people buy. You see that we always advertise Vitex as an e-commerce platform that also has an OMS that is very close to the e-commerce platform. So having this omnichannel approach, being able to welcome a new channel for the consumers of our customers can be a huge opportunity for us in the new market that we're entering as they are changing. Let's also remember that AI is done with a lot of training.

Speaker Change: A very good partner for our customers when they want to change the broad the ink.

Speaker Change: Two phases, where people buy you can see that we always advertise.

Speaker Change: <unk> is the e-commerce platform that also have <unk> that is very close to the E Commerce platform.

So having this only channel approach, being able to welcome a new channel for the consumers of our customers can be a huge opportunity for us at the new market that we are entering as they are changing.

Speaker Change: So having this omnichannel approach being able to welcome a new channel for the consumers of our customers can be a huge opportunity for us.

Speaker Change: The indeed, new market that we.

Speaker Change: Entering as the changing.

Let's remember also that AI is done with a lot of training. VTex is the common starter from the source of true for attribution for all the orders that are generated in every channel, traditional channel or AI channel, let's say, in the future. We believe that having the source of true for the attribution is very important for our customers and partners to develop their own models to develop their capabilities on top of the reach data that we have custody of. That's why we are investing so much in security compliance capabilities to the data. We're investing in making the data available to partners and customers by upsetting the data pipeline product that we are offering to them.

Speaker Change: That should remember also that AI is done with a lot of training.

Geraldo Thomaz: Vitex is the e-commerce platform, the source of truth for attribution for all the orders that are generated in every channel, traditional channel or AI channel, let's say, in the future. We believe that having the source of truth for attribution is very important for our customers and partners to develop their own models, to develop their capabilities on top of the rich data that we have custody of. That's why we are investing so much in security compliance capabilities for the data.

Speaker Change: The Texas E Commerce, starting from the source of truth for attribution.

Speaker Change: For all the orders that are generated every channel traditional channels or AI channel, let's say in the future.

Speaker Change: We believe that having the source of truth for the attribution is very important for our customers and partners to develop their own models to develop their capabilities.

Speaker Change: On top of the reach data that we are that we have cause to be off.

Speaker Change: That's why we're investing so much in security compliance capabilities. The data, we're investing in making the data available to partners and customers.

Geraldo Thomaz: We're investing in making the data available to partners and customers by upselling the data pipeline product that we are offering to them. And we, as Mariano said, I will just reinforce it. I do believe that the latest technology in AI, which is the large language model, is very convenient for retailers to enable them to not only automate a lot of processes that today are very complicated and demand a lot of investments, but also to allow them to go to other channels and produce content that is quality, that is high quality for all kinds of audiences.

Speaker Change: Do you by Upselling the beat the pipeline product that we are offering to them.

And, as Mariano said, I will just reinforce it. I do believe that the latest technology on AI, which is the large language model, is very convenient for the retailers to enable them to not only automate a lot of processes that today is just a very complicated demand, a lot of investments, but also to allow them to go to other channels and produce content that is high quality for all kinds of options. I would say that AI is dematerialization of retailers. Now can every retailer not only defeat that skin. to provide a very powerful and convenient experience to their customers, and we're there to support them and enable them to do that.

Speaker Change: And we as Mariano said I'll just.

Speaker Change: Fourth it I do believe that even though the latest technology only Io, which is the largest edwards was very convenient for them. So.

Speaker Change: So the retailers to enable them to not only automate a lot of processes that today, it's just.

Mariano: A very complicated demand a lot of investments.

Speaker Change: Also Q2.

Speaker Change: Through all of them to go to other channels and produce content that is quality that is high quality for all kinds of audience I would say that AI is the market realization of retailers now can every retailer not only did <unk> Ken.

Geraldo Thomaz: I would say that AI is the materialization of retailers now; can every retailer, not only the big tech companies, provide a very powerful and convenient experience to their customers? And we're there to support them and enable them to do that.

Speaker Change: Provide a very powerful and convenient convenient experience to their customers and and we are there to support them and enable them to do that.

Geraldo Thomaz: Now, that's excellent. We didn't want to follow up, given that you have a lower TCO versus other competitors like these large ones. Do you see that as an opportunity as well, given that there's been a lot of discussions to the, let's say, closer to the business outcome in terms of monetization or not really, we're not there yet. Yeah, when there is a disruption in the market, the value changes.

Speaker Change: Oh, that's excellent meeting one quick follow up given that you have a lower tcl versus other competitors like these large ones do you see that as an opportunity as well given that.

Thiago Kapulskis: Now, that's excellent. Mili, one quick follow-up. Given that you have a lower TCO versus other competitors like these large ones, do you see that as an opportunity as well, given that there's been a lot of discussions to be, let's say, closer to the business outcome in terms of monetization, or not really, aren't we not there yet?

Speaker Change: There's been a lot of discussions to be.

Speaker Change: Let's say closer to the business outcome in terms of monetization or not not really we're not there yet.

Geraldo Thomaz: Yeah, when there is a disruption in the market, the value chain changes. People move, people make RFPs, people prospect other systems, and people prospect because they need to evolve, you know, like if by, you know, by next year everybody's buying using a ShedBot assistant, you know, there's.., maybe thousands of retailers in the US that will need to adjust and we need to catch up with the technology. And then we will see an opportunity for us in the market that we are less mature to show our value. And yes, the low TCO for sure, especially if the interest rates are still in a challenging level, this can make an extra difference for the choice of, of our future customers. Excellent.

Speaker Change: Yeah.

Speaker Change: There is a disruption in the market the value chain changes.

People move, people make RFPs, people prospect other systems and people prospect because they need to evolve, like F. By next year, everybody is buying, using a shed, a shed bought assistance, maybe thousands of retailers in the US that will need to adjust, and we need to catch up with the technology, and then we will see an opportunity for us in the market that we are less mature to show our value. And yes, the low TCO, for sure, especially if the interest rates are still in a challenging level. This can make an extra difference for the choice of our customers, of our future customers.

Speaker Change: People move people.

Speaker Change: Make.

Speaker Change: Rfps people prospect at the system, then people prospect because they need to evolve.

Speaker Change: By you'll know by next year, everybody is buying using a shared.

Speaker Change: But the assistant.

Speaker Change: No.

Speaker Change: Maybe thousands of retailers in the U S, who need to adjust and we need to catch up with the technology and and then we will see an opportunity for us in the markets that were less mature sure sure value and yes, the low fuel for sure, especially.

Speaker Change: If the interest rates are still in a challenging level. This will make this can make an extra difference for the choice of our customers of our future customers.

Thiago Kapulskis: Excellent. Thank you so much for the details.

Speaker Change: Excellent. Thank you so much for the detail.

Excellent. Thank you so much for the day.

Speaker Change: Okay.

Maddy Shraige: Our next question comes from a line of Maddy Shraige with KeyBank. Please go ahead. Hey guys, and thank you for taking the question. I was just wondering if you could provide an update for maybe sales cycle links, if there's been any changes to reflap forming budgets that you've seen, and then I'm also wondering if you could give an update on what kind of big influence the guidance in terms of customer spend expectations. Thanks.

Speaker Change: Our next question comes from the line of Maddie Schrage with Keybanc. Please go ahead.

Operator: Our next question comes from the line of Maddy Schrage with KeyBank. Please go ahead.

Maddie Schrage: Hey, guys and thank you for taking the question I was just wondering if you could provide an update.

Madison Schrage: Hey, guys, and thank you for taking the question. I was just wondering if you could provide an update on maybe sales cycle length, if there's been any changes to replatforming budgets that you've seen. And then I'm also wondering if you could give an update on what's kind of baked into guidance in terms of consumer spend expectations. Thanks.

Maddie Schrage: Sales cycle lengths, if there's been any change to re platforming budgets that you've seen.

Speaker Change: And then I'm also wondering if you could give an update on what's kind of baked into guidance in terms of consumers and expectation.

Speaker Change: Yeah.

Hi, Maddy. Thanks for the question. So on the sales cycle and corporate budgets, we have been, we've seen a stabilization of our sales cycle. I think if we invite the tape a little bit going back to 2022, when inflation was high and the interest rates were increasing, we did see sales cycle lanternning and corporate budgets being more maybe short term low hanging food focused. Throughout 2023, we saw a stabilization of our sales cycle, and towards the second half of 2023, actually some improvement. Now in 2024, I would say that the sales cycle has been kind of stable versus how we closed it last year.

Speaker Change: Yeah, Hi, Hi, many thanks for the question so on the sales cycle land.

Ricardo Sodre: Yeah, hi, I'm Eddie. Thanks for the question. So on the sales cycle and corporate budgets, we, we have been, we've seen a stabilization of our sales cycle. I think if we rewrite the tape a little bit, going back to 2022, when inflation was high, and interest rates were increasing, we did see a sales cycle lengthening. And, and, you know, corporate budgets being more, maybe short term, low hanging fruit focused. Throughout 2023, we saw an stabilization of our sales cycle, and towards the second half of 2023, actually some improvement.

Speaker Change: Corporate budgets.

Speaker Change: We have been we've seen a stabilization of our sales cycle I think if we rewind the tape a little bit going back to 2022, when inflation was high and interest rates were increasing we did see sales cycle.

Anthony: Anthony Inc.

Speaker Change: And corporate budgets being more.

Anthony: Maybe short term low hanging fruit focused.

Anthony: Throughout 2023, and we saw any stabilization of our sales cycle and towards the second half of 2023 actually some improvement.

Ricardo Sodre: Now in 2024, I would say that the sales cycle has been, you know, kind of stable versus how we closed it last year. So it has not been, you know, neither a relevant tailwind or headwind to our growth.

Anthony: Now in 2020 for I would say that the sales cycle has been kind of stable versus <unk>.

Anthony: How we close it last year. So it has not been neither relevant tailwind or headwind to our growth.

Ricardo Camata Sabre: So it has not been either relevant, tailwind, or headwind to our growth. And on corporate budgets, obviously, with high interest rates and money being more expensive, our corporations are more mindful of their budgets, and they are focused on delivering a bottom line that's attractive. With our value proposition of having a lower TCO solution to our customers and flexible and easy to task solutions so they can test different go-to markets, I think this has been a positive pitch for us with our customer base and prospects. So I mean, it's challenging, but it's something that we are navigating well, I would say, as you can see by the growth of our existing customer base as well as new customers that we are adding.

Ricardo Sodre: And on corporate budgets, obviously, with high interest rates and money being more expensive, all corporations are more mindful of their budgets, and they are, you know, focused on delivering a bottom line that's attractive. With our value proposition of having a lower TCO solution for our customers and, you know, flexible and easy-to-test solutions so they can test different go-to markets, I think this has been, you know, a positive pitch for us with our customer base and prospects.

Anthony: <unk>.

Anthony: On corporate budgets obviously.

Anthony: With high interest rates and.

Anthony: Money be more expensive.

Anthony: All corporations are more mindful of their budgets and they are focused on delivering.

Anthony: Bottomline that's attractive.

Speaker Change: With our value proposition of having a lower <unk> solution to our customers.

Anthony: <unk> flexible and easy to attach solutions. So they can test different go to market I think this has been a positive.

Anthony: Beach for us with our customer base and prospects so.

Ricardo Sodre: So, I mean, it's challenging, but it's something that we are navigating well. I would say, as you can see by the growth of our existing customer base, as well as new customers that we are adding. And on the second question, Mary, if you could repeat, please, that would be great. Yeah, perfect.

Anthony: I mean, it's challenging but it's something that we are navigating well I would say as you can see by the growth of our existing customer base.

Speaker Change: As well as new customers that we're adding.

Anthony: And then the second question Mary if you could please that'll be great.

And in the second question, Mary, if you could briefly, please, that would be great. Yeah, perfect. The second question was just, can you talk about what you're expecting in terms of what's based on the guidance from a consumer perspective for the rest of the year?

Mary: Yeah, perfect and then the.

Madison Schrage: Yeah, perfect. The second question was just can you talk about what you're expecting in terms of guidance from a consumer perspective for the rest of the year?

Mary: Second question was just can you talk about what youre expecting in terms of what's baked into guidance from that consumer.

Mary: Perspective for the rest of the year.

Ricardo Sodre: I can, yeah, I can. I can start here. So as I mentioned in the question about the guidance, we are assuming for Q3 and over, similar KPIs than what we saw in Q2. On a same source sales basis, we continue to see our existing customers growing their GMV in the teens level, so that's something that's above what we are seeing for the overall e-commerce market. So it's great to see our customer base out-performing the market.

Again, I can start here. Mary, so as I mentioned on the question about the guidance, we are assuming for Q3 and onwards, singular KPIs and what we saw in Q2, on the same sort of sales basis, we continue to see our customer existing customers growing their GMB in the teams level. So that's something that's above what we are seeing for the overall e-commerce market. So it's great to see our customer base over-performing the market.

Speaker Change: Yeah, I can I can start here so as I mentioned on the question about the guidance we are assuming.

Speaker Change: For Q3, and or similar Kpis and what we saw in Q2.

Anthony: On a same store sales.

Mary: Basis, we'll continue to see.

Anthony: Our customer existing customers growing their GMP in the teens level.

Anthony: So thats something thats above what we are seeing for the overall e-commerce market. So it's great to see.

Mary: Our customer base over over performing the market.

Ricardo Camata Sabre: Now, interest rates are still high, and when you look at consumer confidence across different countries, you see some volatility. And so it is still an uncertain macro out there. So we are not embedding in our guidance and forecast any recovery on consumer spending. We are now; we are also not really expecting a recession or embedding a recession in our numbers or decreasing consumer spending at this point. Okay, perfect.

Ricardo Sodre: Now, interest rates are still high, and when you look at consumer confidence across different countries, you see some volatility. And so it's still an uncertain macro out there. So we are not embedding in our guidance and forecast any recovery in consumer spending. We are also not really expecting a recession or embedding a recession in our numbers or decreasing consumer spending at this point.

Anthony: Now interest rates are still high and when you look at.

Madison Schrage: Okay, perfect. And just a point of clarification, because you mentioned Argentina was kind of worse month over month. So are you kind of expecting that low point in terms of the consumer spend level from Argentina specifically? Yeah, I mentioned it was getting worse.

Anthony: Consumer confidence across different countries, you'll see some volatility.

Anthony: And so it's still an uncertain macro out there so we're not embedding in our guidance and forecast.

Anthony: Any recovery.

Anthony: On consumer spending we are now we are also not really expecting.

Anthony: A recessionary embedding a recession in our numbers are decreasing consumer spending at that at this point.

Speaker Change: Okay, perfect and just a point of clarification, because you mentioned, Argentina whats kind of worse.

And just a point of clarification, because you mentioned Argentine, I was kind of worse month over month. So are you kind of expecting that low point in terms of the customer spend level from like Argentine specifically? Yeah, I mentioned was getting worse month over month until April.

Speaker Change: So are you kind of expecting that low point in terms of that.

Speaker Change: Then level from Lake Argentina, particularly.

Speaker Change: Yes, I mentioned was getting worst months per month.

Ricardo Sodre: Yeah, I mentioned it was getting worse month after month until April, Maddy. Since then, we saw some recovery in May with the hot sales event. That's kind of like Black Friday. But the country is still, you know, volatile. So we don't see a clear trend in Argentina at this moment.

Speaker Change: Until April.

Mehdi, since then we saw some recovery, may with the hot sales event that's kind of like the Black Friday, but the country is still volatile. So we don't see a clear trend in that in Argentina at this moment.

Speaker Change: Mehdi.

Speaker Change: Since then we saw some recovery may with the hot sales event, that's kind of like the Black Friday.

Speaker Change: But the countries is still volatile so we don't see a clear trend in that in Argentina.

Speaker Change: This moment.

Anthony: Okay.

Thank you so much. Thank you.

Speaker Change: Thank you so much.

Speaker Change: Thank you.

Geraldo Thomaz: This concludes our Q&A session.

Anthony: This concludes our Q&A session I will now turn the call back over to Gerardo to amass founder and co CEO of <unk> for closing remarks.

Geraldo Thomaz: This concludes our Q&A session. I will now turn the call back over to Geraldo Thomaz, founder and co-CEO of VTechs, for closing remarks.

I will now turn the call back over to Deraldo Tomas, founder and co-CO of VTECs, for closing remarks. The second quarter has proven to be a stand-up period for VTEC, which has been marked by robust performance and strategic milestones. Our existing customers have demonstrated the resiliency and success across diverse markets and seasonal peaks. The success underscores our platform capability to handle high transaction volumes effectively, target diverse consumer segments, and help our customer consistently outperform the market. We continue to experience strong momentum, contract signatures, and our global ecosystem continues to mature, generating positive externalities as we continue to execute our profitable growth strategy and deliver long-term value.

Gerardo: The second quarter has proven to be a standout period for vertex, which has been market by robust performance in strategic milestones.

Geraldo Thomaz: The second quarter has proven to be a standout period for VITEC, which has been marked by robust performance and strategic milestones. Our existing customers have demonstrated resiliency and success across diverse markets and seasonal peaks. This success underscores our platform capability to handle high transaction volumes, effectively target diverse consumer segments, and help our customers consistently outperform the market. We continue to experience strong momentum in contract signatures, and our global ecosystem continues to mature, generating positive externality.

Gerardo: Listing customers have demonstrated the resiliency and success across diverse markets and seasonal peak.

Gerardo: The success underscore our platform capabilities to handle high transaction volumes effectively target diverse consumer segments and help our customer consistently outperformed the market.

Gerardo: We continue to experience strong momentum contract signatures in a global ecosystem continued continues to mature generating positive externality.

Geraldo Thomaz: As we continue to execute our profitable growth strategy and deliver long-term value, we're more confident than ever that we are well-positioned to achieve our vision of becoming the backbone for connected commerce. We appreciate the support of our investors and partners on this journey and remain focused on executing with excellence to capitalize on the significant opportunities ahead.

Gerardo: As we continue to execute our profitable growth strategy and deliver long term value. We're more confident in Nashville that we are well positioned to achieve our vision.

We are more confident than ever that we are well positioned to achieve our vision to us becoming the backbone for a productive cause. We appreciate the support of our investors and partners on this journey and remain focused on executing with excellence to capitalize on this significant opportunity ahead.

Speaker Change: <unk> two of becoming the backbone for conductive carbon.

Gerardo: We appreciate the support of our investors and partners on this journey and we remain focused on executing with excellence to capitalize on the significant opportunities ahead.

Speaker Change: This concludes today's call you may now disconnect.

Operator: This concludes today's call. You may now disconnect.

Speaker Change: Please wait the conference will begin shortly.

Operator: Please wait; the conference will begin shortly.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: Okay.

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Gerardo: Okay.

Gerardo: Yes.

Gerardo: Okay.

Gerardo: Yes.

Gerardo: Yes.

Gerardo: Okay.

Gerardo: [music].

Geraldo Thomaz: and remain focused on this journey and remain focused on this journey and remain focused on this journey and remain focused.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: Yeah.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: Sure.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Okay.