VTEX (VTEX) Q1 2025 earnings call transcript

VTEX First Quarter 2025 Conference Call Transcript Hello everyone, and welcome to VTEX's earnings conference call for the first quarter of 2025. I'm Julia Vater Fernández, VP of Investor Relations. Joining me today are Geraldo Thomaz Jr. , our Co-Founder and Co-CEO, and Ricardo Camatta Sodre, our Chief Financial Officer. Also joining us for the Q&A session are Mariano Gomide de Faria, Co-Founder and Co-CEO, and André Spolidoro, Chief Strategy Officer. Before we begin, please note that today's remarks may include forward-looking statements. These statements are based on our current assumptions and . projections, and actual results may differ. Additional information regarding risks and uncertainties is detailed in our Form 20-F for the year ended December 31, 2024, and other filings with the SEC, all of which are available on our Investor Relations website.

During this call, we may also reference certain non-GAAP financial measures. Reconciliations to the most comparable GAAP figures can be found in our Q1 2025 earnings press release, also available on our Investor Relations site.

With that, let me turn the call over to Geraldo.

Introduction and Disclaimer Investor Relations Thank you Julia. Welcome everyone, and thanks for joining our first quarter 2025 earnings conference call. We delivered a solid start to the year, despite the ongoing macroeconomic volatility. Subscription revenue grew 15% in FXN in Q1. As we look ahead, the recent go-lives of key enterprise customers, combined with the continued progress in our product innovation and platform expansion initiatives, reinforce our confidence in the sustainability of our profitable growth strategy. In a seasonally softer quarter, we also delivered profitable growth and significant margin expansion. Our gross profit reached $41.0 million, a 22% growth in FX neutral and 3.7 percentage points margin increase year-over-year. Additionally, our non-GAAP operating income increased to $5.3 million, an 85% growth and 4.3 percentage points margin increase year-over-year.

The strong operating income was supported by even stronger free cash flow generation of $6.6 million. Finally, our non-GAAP net income reached $5.3 million in Q1 and $34.5 million over the last twelve months. I will let Ricardo further expand on these financials shortly. Overview Geraldo Thomaz Jr. VTEX continues to solidify its position as the platform of choice for global CIOs and CEOs seeking operational efficiency and commercial agility. Enterprises choose VTEX for more than software but for outcomes: accelerated time to market, increased revenue, improved margins, and reduced complexity.

Looking ahead, we are building a future for VTEX that goes even beyond that. A future where VTEX intelligent agents evolve into digital workers, autonomously managing core workflows across service, demand generation, and merchandising for our customers. We are not just adapting to the future of commerce, we are building it.

Now, let me highlight a few commercial achievements of the quarter. Overview Geraldo Thomaz Jr. In Q1 we successfully brought several new customers live, including: ❏ Magazzino and LG in Argentina; ❏ Americanas, Apoio Entrega, Moda Colmeia, Oscar Calçados and Urban Performance in Brazil; ❏ LF10 in Colombia; ❏ Orocash in Ecuador; ❏ La Sirena in Spain; ❏ Berel and Procarga in Mexico; and ❏ GS1 US and J. W. Pepper in the US. We also strengthened relationships with key existing customers: ❏ Bemol launched a new vertical, Bemol Pharma, now operating two stores in Brazil; ❏ Colgate launched a new store in Germany, expanding its VTEX presence across the Americas and Europe; ❏ Crocs launched a new store in Chile, now present in five Latin American markets with VTEX; ❏ Hearst launched Oprah Daily Shop in the US, expanding its VTEX presence to six stores; ❏ Levi’s added Colombia, now present in six Latin American markets; and ❏ Mondelez launched a new B2B store in Spain and in Ecuador, expanding its VTEX footprint into Europe.

Another noteworthy development this quarter, though not yet live, is that Manchester City Football Club has joined the VTEX platform. The Club is currently implementing VTEX as the foundation for its official digital commerce strategy. We are supporting Manchester City in reimagining and streamlining its digital commerce experiences to deliver a seamless and intuitive journey for fans. This initiative will enable supporters to access and purchase City-related experiences through a unified and efficient checkout process, whether online or via mobile. Overview Geraldo Thomaz Jr. To build on our momentum in contract signatures and reinforce brand trust, we launched the "Give Your All" campaign, featuring cricket icon Ravindra Jadeja as a VTEX ambassador. The campaign resonates strongly with CEOs and CTOs in the US, where approximately half have an affinity for cricket, helping us connect with an influential and professionally relevant audience.

We also hosted the second edition of VTEX Connect NYC, our flagship event for senior commerce executives, held immediately following NRF. This year, we expanded the event’s scope and quality, welcoming CEOs, CIOs, and senior executives from leading retailers. Simone Biles delivered a keynote fireside chat, joined by Brazilian gymnastics champion Rebeca Andrade. The event showcased our leadership in digital commerce and strengthened our relationships with partners and decision-makers. In addition to its increased impact, the event was executed with greater cost efficiency. Supported by over 14 sponsors, VTEX Connect NYC served as a strategic platform to deepen relationships with our partners, enhance VTEX’s visibility among top industry stakeholders, and engage directly with key decision-makers within the NRF audience. By gathering the industry’s most influential voices and integrating globally recognized figures, we continue to elevate VTEX’s position at the forefront of digital commerce transformation.

Overview Geraldo Thomaz Jr. We're also proud to share that VTEX was once again recognized as a Customers’ Choice in the 2025 Gartner® Voice of the Customer for Digital Commerce report, for the second year in a row. This recognition is especially meaningful because it is based entirely on customer reviews, underscoring our platform's impact and reliability. This recognition, based solely on real customer reviews, highlights our ability to deliver exceptional product capabilities, ease of use, reliable support, and measurable business impact. In a landscape where choosing the right commerce partner is mission-critical, being named Customers’ Choice for the second year in a row reinforces VTEX’s position as the trusted, scalable, and innovation-driven platform of choice for global enterprises. Before moving into our customer success stories, I’d like to revisit a concept introduced earlier: VTEX is evolving from a single platform into a comprehensive suite of commerce products, designed with seamless interoperability at its core.

This transformation underpins our positioning as “the commerce suite of choice for bold CIOs and CEOs globally. ” We’re doubling down on two high-impact product bets: B2B commerce and Retail Media. In Q1 2025, we accelerated our Retail Media strategy with the acquisition of Newtail, a leader in Brazil’s retail advertising space. This added over 400 advertisers and brands to our network including Casas Bahia, Panvel, KaBuM! , and Leroy Merlin, and positioned VTEX as a leading end-to-end retail media platform. Overview Geraldo Thomaz Jr. With VTEX Ads, we now offer a unified, high-performance solution that combines our composable commerce infrastructure with Newtail’s media innovation. Advertisers gain access to hyper-targeted inventory, detailed performance insights, and intelligent placements, enabling smarter targeting and stronger returns across the full commerce journey.

We’re building the next generation of scalable, data-driven retail media, and we’re here to lead and consolidate the space. With that said, let’s go into a couple of customer stories to put in a tangible way how we are working side by side with our customers to get meaningful business impact. Americanas, one of Brazil’s most iconic and influential retail giants, chose VTEX to simplify operations and drive efficiency with innovative solutions replacing some of in house developed systems. Through VTEX's out-of-the-box features and collaborations with specialized partners, we delivered a comprehensive commerce solution tailored to Americanas’ needs. This included robust omnichannel capabilities, marketplace integration and advertising tools. These solutions streamlined processes, accelerated time-to-market, and significantly lowered the total cost of ownership.

In addition to VTEX’s native capabilities, Americanas is also leveraging the strength of the VTEX ecosystem by integrating partner solutions, replacing certain legacy systems with more scalable alternatives. Following a detailed system analysis and close collaboration, we co-designed a streamlined, future-ready architecture that enhances operational efficiency, supports rapid scalability, and aligns seamlessly with Americanas' long-term strategic objectives. The Americanas win underscores the continued depth of opportunity within Brazil, a market where VTEX already has a strong presence, yet still holds significant runway for growth. It demonstrates that even in more developed geographies, there are remaining sizable, high-impact digital transformation opportunities for us to capture over the coming years. A leading frozen food retailer in Spain, partnered with VTEX to modernize its digital commerce and bridge the gap between its physical stores and online presence.

Seeking greater flexibility, the brand chose VTEX for its ability to manage complex catalogs and store-level logistics with ease. VTEX also enabled smooth integration with the customer’s new loyalty program, creating a more intuitive and personalized customer journey. With marketplace capabilities and omnichannel features now fully implemented, they are delivering a seamless, connected shopping experience across every touchpoint. Overview Geraldo Thomaz Jr. Cencosud, one of Latin America’s largest retail groups, transformed its post-purchase experience in Brazil by implementing Weni by VTEX to automate out-of-stock product substitutions via WhatsApp. Initially launched with Prezunic and quickly scaled to Bretas, GBarbosa, and Mercantil, the solution enables real-time customer approvals and delivered a 9% increase in the average order value of impacted orders. By streamlining communication and driving operational efficiency, Cencosud is delivering a smarter, more scalable digital experience across its brands.

Overview Geraldo Thomaz Jr. I'm also pleased to highlight a significant customer success that demonstrates the versatility and power of our platform. J. W. Pepper, one of the leading sheet music retailers in the US, has successfully transformed its digital commerce operations with VTEX. Facing industry-specific challenges such as complex product discovery and event-driven shopping, the company leveraged VTEX’s composable architecture and native headless CMS to build tailored experiences for educators and worship leaders. This empowered their business teams to accelerate content updates and reduce reliance on development resources. Rather than a full rebuild, we adopted a strategic approach, retaining critical legacy workflows while modernizing the core commerce journey through targeted integrations and specialized tools for digital licensing, personalization, and complex checkout flows.

Today, J. W. Pepper operates on a flexible, scalable platform that supports a diverse customer base and adapts easily to seasonal demand patterns. This case underscores our ability to deliver impactful digital transformation in specialized, high-complexity industries, while preserving business continuity and maximizing ROI. Now, I'd like to take a moment to express my gratitude to our 1,320 VTEX team members, whose extraordinary contributions propel us forward as the backbone for connected commerce. I'd also like to thank our valued customers, partners, and investors. I will now hand the call over to Ricardo. Nestlé, one of the world’s largest food and beverage companies, drove strong results using VTEX Ads to power Retail Media campaigns across key partner channels. Confronted with limited visibility into retail sales performance, Nestlé turned to VTEX Ads for real-time insights directly from retailer platforms.

This data-driven approach enabled rapid campaign optimization and stronger performance across core categories. In its latest major campaign, Nestlé achieved a 16.3% return on ad spend in the chocolate category. Beyond immediate impact, the initiative unlocked valuable strategic insights for future activations. With VTEX Ads, Nestlé streamlined collaboration with retail partners and showcased how real-time data can drive smarter decisions and stronger outcomes in a highly competitive market. Procarga, a leading distributor and manufacturer of lifting solutions in Mexico, selected VTEX to accelerate its digital transformation. Aiming to enhance the buying experience for B2B distributors and expand into B2C, the company is adopting a dual-channel strategy powered by VTEX. The new solution, built on VTEX’s composable architecture, delivers a modern, self-service commerce experience focused on efficiency and scalability.

It features custom UX/UI, ERP integrations, and mobile-ready access, ensuring a seamless journey across all channels. This initiative marks a strategic move for Procarga, strengthening customer engagement and driving growth across Mexico’s industrial and retail markets.

Overview Geraldo Thomaz Jr. Thank you, Geraldo. Hi everyone, I am pleased to share VTEX's Q1 2025 financial results. Before diving into the numbers, as a reminder, this is our first quarter reporting under US GAAP. We published a reconciliation presentation in a Form 6-K on April 15, and a comparison of 2023 and 2024 financials under US GAAP is available on our Investor Relations website.

With that said, let’s go to our quarterly numbers. GMV for the quarter reached $4.3 billion, growing 8% YoY in US dollars, and 17% on an FX-neutral basis. This led to subscription revenue reaching $52.6 million, compared to $50.4 million in Q1 of last year, a 4% increase in USD, and 15% on an FX-neutral basis. Financial Update Ricardo Camatta Sodre Now, moving down the P&L, we are pleased to announce the positive operational leverage achieved, even with the inherently softer seasonality observed in all first quarters. Our non-GAAP subscription gross margin reached 79% this quarter, up 191 basis points YoY from 77% in Q1 2024. This expansion reflects our continued focus on operational efficiency, with the most notable gains coming from customer support optimization efforts.

Leveraging AI-powered automation, we were able to improve service quality while significantly reducing support-related costs. GMV US$ billions 16.5 18.2 4.0 4.3 2023 2024 1Q24 1Q25 YoY growth FXN (%) 25% 16% 20% 17% Subscription Revenue US$ millions 189.6 217.7 50.4 52.6 2023 2024 1Q24 1Q25 YoY growth FXN (%) 23% 21% 23% 15% Subscription Gross Profit Non-GAAP, US$ millions 144.4 170.2 38.8 41.6 2023 2024 1Q24 1Q25 YoY growth FXN (%) 29% 26% 28% 22% Δ Others (0.1)% Δ G&A 0.4% Δ R&D (1.5)% Δ S&M 1.8% Δ Gross profit 3.7%5.4% 1Q24 Non-GAAP Income from operations 9.8% 1Q25 Non-GAAP Income from operations Our total gross margin, which includes services, rose to 76%, up 371 basis points YoY compared to 72% in Q1 2024.

Our total gross margin improvement was mostly driven by: the lower mix of services revenue in our total revenue, as we are relying more on our ecosystem to provide implementation services; and by the subscription gross margin gains I just mentioned. On the expense side, we maintained strong discipline. Non-GAAP operating expenses came in at $35.9 million, slightly up from $35.2 million in the same quarter last year, an increase of less than 2% YoY. This reflects stable S&M and G&A expenses, while the increase in R&D was strategic, supporting our continued investment in product development and innovation. This disciplined approach led to a significant improvement in profitability, with non-GAAP operating income reaching US$5.3 million in Q1 2025, up from US$2.9 million in Q1 2024, an increase of over 80% YoY in US dollars.

This translates into a 4 percentage points margin expansion, bringing our non-GAAP operating income margin to 10% for the quarter. These results highlight the strength of our operating model and the consistent evolution of our financial profile. Financial Update Ricardo Camatta Sodre As we evolve in our profitable growth strategy, non-GAAP net income has become an increasingly relevant metric. In Q1 2025, non-GAAP net income reached US$5.3 million and 10% margin, up from US$2.4 million in the same period last year, more than doubling YoY, and a 5.2 percentage points improvement in margin. As mentioned by Geraldo, on a trailing twelve-month basis, non-GAAP net income totaled US$34.5 million, reflecting the ongoing strengthening of our profitability profile as we continue executing with discipline and scaling efficiently.

Aligned with our non-GAAP operating income, as of the three months ended March 31, 2025, we had a positive US$6.6 million free cash flow, compared to . Financial Update Ricardo Camatta Sodre US$1.6 million free cash flow in the same quarter of the prior year, reaching a free cash flow margin of 12% and a 9 percentage points margin improvement YoY. In the first quarter of 2025, regarding the one-year share repurchase program authorized by our Board of Directors on December 3, 2024, VTEX repurchased a total of 2.7 million Class A common shares at an average price of US$5.56 per share, representing an aggregate amount of US$15.0 million. Considering the current and the previous years’ share repurchase programs, the total executed amount reached 15.2 million shares, with an average price of US$4.86 per share and a total cost of US$74.3 million.

Non-GAAP Net Income US$ millions 2023 2024 1Q24 1Q25 0.0 31.6 2.4 5.3 Non-GAAP Net Income Margin (%) 14% 5%0% 10% Free Cash Flow US$ millions 2023 2024 1Q24 1Q25 4.9 23.9 1.6 6.6 Free Cash Flow Margin (%) 11% 3%2% 12% As we move forward with our business outlook, we continue to navigate a macroeconomic environment marked by volatility in same-store sales and GMV growth, increasing the uncertainty of projections. That said, we remain confident in VTEX's profitable growth trajectory. VTEX is well-positioned to capture an attractive market opportunity, and we remain encouraged by our leading market positioning, platform expansion and operational leverage. Considering this, we are currently targeting FX neutral YoY subscription revenue growth of 12.5% to 15.5% for the second quarter of 2025, implying a US$57.0 million to US$58.5 million range.

For the full year 2025, as we continue executing our profitable growth strategy, we continue to target FX neutral YoY subscription revenue growth of 14.0% to 17.0%, implying a range of US$238 million to US$244 million based on the average of April FX rate. We are targeting non-GAAP operating income and free cash flow margins of mid teens. Financial Update Ricardo Camatta Sodre To wrap up, in Q1 we delivered solid subscription revenue growth. As indicated by our guidance, we remain confident in the strength and sustainability of our profitable growth strategy in Q2 and for the full year 2025, supported by key new enterprise customers' go-lives and our ongoing platform expansion. We will stay focused on disciplined execution, leveraging our strong fundamentals and resilient business model as we continue to gain global traction as the backbone for connected commerce.

We remain committed to delivering lasting value for our customers, partners, and shareholders. With that, let’s open it up for questions now. Thank you.

Closing Remarks Geraldo Thomaz Jr. As we continue to evolve from a platform into a comprehensive commerce suite, and lay the groundwork for a future shaped by intelligent automation, we are confident that VTEX will remain at the forefront of digital commerce transformation. We’re excited by what’s ahead. We’ll continue to execute with focus, scale with discipline and purpose, and deliver long-term value for our customers, partners, employees, and shareholders. We are just getting started. Thank you again for your time and partnership. We look forward to speaking with you on our next earnings call. Have a great week. Thank you!

Contact Julia Vater Fernández VP of Investor Relations investors@vtex. com Thank you for the great questions. To close, I want to reiterate the confidence we have in the trajectory we’re building at VTEX. We started the year with solid execution, growth, profitability and free cash flow in a seasonally softer quarter. This performance reflects not just short-term wins, but the strength of the foundation we’ve laid over the past year, built on discipline, resilience, and a clear strategic direction. We’re gaining meaningful traction across regions, winning and expanding with enterprise customers who choose VTEX not just for technology, but for outcomes: faster time to market, improved margins, and simpler operations, among many other reasons. .