Item 2 – Management’s discussion and analysis of financial condition and results of operations
This Management's Discussion and Analysis of Financial Condition and Results of Operations section may contain certain forward-looking statements that involve risks and
uncertainties. Our actual results and the timing of events may differ significantly from those expressed or implied in such forward-looking statements for several reasons, including those described in our prior filings with the U.S. Securities and
Exchange Commission.
The following analysis and discussion of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated interim
financial statements as of September 30, 2023 and 2022 included elsewhere in this document.
We are redefining the boundaries between digital and physical commerce, empowering personal shoppers, and fostering seamless interactions across both realms. Our aim is to boost our
customers' conversion and efficiency rates in their commerce operations. Through VTEX, enterprises can easily build online stores, integrate and manage orders across multiple channels, create marketplaces to sell third-party vendors' products, and
optimize their product delivery process, among many other capabilities.
With over 20 years of experience in digital commerce, VTEX has been a leader in accelerating the digital commerce transformation in Latin America and is expanding globally. Our
platform is engineered to enterprise-level standards and functionality with approximately 85% of our GMV coming from large, blue-chip companies (i.e. customers with more than US$10 million of GMV per year). We are trusted by more than 2,600 customers
with over 3,400 active online stores across 38 countries to connect with their consumers in a meaningful way.
We benefit from the acceleration of digitalization globally, and in particular in Latin America, where ecommerce is still underpenetrated. Accelerating ecommerce growth, evolving
consumer expectations and the proliferation of digital shopping alternatives are raising the bar for brands and retailers to stay relevant. Legacy structures developed over years force enterprises to choose between deep customization and speed to
market. Our technology combined with our ecosystem of partners solves this problem. We deliver flexibility and simplicity to complex, mission critical commerce operations. We were named a leader in the IDC MarketScape: Worldwide B2C Digital Commerce
Platforms 2020 Vendor Assessment. We were also recognized as Visionary in the 2023 Gartner Magic Quadrant™ for Digital Commerce for VTEX’s Ability to Execute and Completeness of Vision, August 2023 report, and top-rated digital commerce platform at
Gartner Peer Insights ‘Voice of the Customer’: Digital Commerce. Additionally, we were named a “Contender” in The Forrester Wave™: B2C Commerce Solutions and VTEX was awarded medals in all 24 categories of the “2023 Paradigm B2B Combine: Enterprise
and Midmarket Editions”.
We offer access to our platform on a subscription basis, which accounted for 93.9% of our revenue for the three-month period ended September 30, 2023, compared to 94.2% of our revenue in the same
period of 2022. Our subscription revenue is based on a fixed subscription fee and a transaction-based fee. The transaction-based fee accounts for most of our subscription revenues and is primarily structured as a take rate or percentage of the total
value of the orders processed through our platform, including value added taxes and shipping, which we refer to as our GMV. Our transaction-based fee model aligns our success with our customers’ success and our revenue grows as our customers’ GMV
grows. In the three-month period ended September 30, 2023, our GMV increased to US$4.0 billion from US$3.0 billion in the same period of 2022, representing an increase of 35.2% in USD and 27.8% on an FX neutral basis. In the same period, our revenue
increased to US$50.6 million from US$38.8 million, representing an increase of 30.6% in USD and 24.5% on an FX neutral basis.
The key metric we use to measure our performance, identify trends affecting our business, formulate our business plan projections and support our strategic decisions is GMV. Due to the seasonality of
ecommerce and the foreign exchange effects resulting from the volatility of the currencies of the jurisdictions where we operate (particularly Latin America countries) vis-à-vis the U.S. Dollar (which is our functional currency), our management
compares GMV on a year-over-year and foreign exchange neutral basis. The foreign exchange neutral measures are calculated by using the average monthly exchange rates for each month during the previous year, adjusted by inflation in countries with
hyper-inflation, and applying them to the corresponding months of the current year, so as to calculate what our results would have been had exchange rates remained stable from one year to the next.
GMV is the total value of customer orders processed through our platform, including value added taxes and shipping. Our GMV does not include the value of orders processed by our SMB customers or B2B
transactions. Due to our transaction-based subscription model, we believe that GMV growth is linked with our revenue growth and we track GMV as an indicator of the success of our customers, the performance of the platform and our market share.
Our transaction-based subscription model, similar to most retail businesses, experiences seasonal fluctuations. Historically, we have generated higher net sales in the fourth quarter,
as a consequence of the concentration of special dates during that quarter.
The following table sets forth our quarterly condensed consolidated interim statements of profit or loss data for each of the last historical nine quarters. The condensed consolidated
interim statements of profit or loss data below has been prepared on the same basis as the unaudited consolidated financial statements included elsewhere in this document and, in our opinion, reflects all necessary adjustments, consisting only of
ordinary course recurring adjustments, necessary to present this information fairly and accurately. These historical quarterly results of operations are not necessarily indicative of the results of operations for any future period. The pandemic's
macroeconomic impact led to fluctuations in seasonal patterns, resulting in certain levels of volatility. Nevertheless, we foresee these effects gradually normalizing as the macroeconomic conditions ease.
|
For the three months ended
(unaudited)
|
(in US$ millions)
|
September 30, 2021
|
|
December 31, 2021
|
|
March
31, 2022
|
|
June
30, 2022
|
|
September 30, 2022
|
|
December 31, 2022
|
|
March
31, 2023
|
|
June
30, 2023
|
|
September 30, 2023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subscription revenue
|
29.6
|
|
34.5
|
|
32.6
|
|
36.6
|
|
36.5
|
|
42.7
|
|
39.8
|
|
44.8
|
|
47.5
|
Services revenue
|
2.2
|
|
2.6
|
|
2.1
|
|
2.1
|
|
2.2
|
|
2.8
|
|
2.5
|
|
3.1
|
|
3.1
|
Total revenue
|
31.9
|
|
37.1
|
|
34.7
|
|
38.7
|
|
38.8
|
|
45.5
|
|
42.3
|
|
47.9
|
|
50.6
|
Subscription cost
|
(9.7)
|
|
(10.5)
|
|
(10.0)
|
|
(10.2)
|
|
(9.8)
|
|
(11.5)
|
|
(10.4)
|
|
(11.2)
|
|
(11.4)
|
Services cost
|
(3.1)
|
|
(3.3)
|
|
(2.6)
|
|
(2.8)
|
|
(2.9)
|
|
(3.1)
|
|
(4.2)
|
|
(4.4)
|
|
(3.6)
|
Total cost
|
(12.8)
|
|
(13.8)
|
|
(12.6)
|
|
(13.0)
|
|
(12.6)
|
|
(14.6)
|
|
(14.6)
|
|
(15.5)
|
|
(15.0)
|
Gross profit
|
19.1
|
|
23.4
|
|
22.1
|
|
25.7
|
|
26.1
|
|
30.9
|
|
27.7
|
|
32.4
|
|
35.6
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative
|
(9.9)
|
|
(6.9)
|
|
(6.9)
|
|
(7.4)
|
|
(6.9)
|
|
(7.1)
|
|
(7.9)
|
|
(8.2)
|
|
(8.4)
|
Sales and marketing
|
(19.3)
|
|
(17.5)
|
|
(17.9)
|
|
(21.3)
|
|
(16.2)
|
|
(12.4)
|
|
(14.8)
|
|
(14.4)
|
|
(15.1)
|
Research and development
|
(14.2)
|
|
(11.9)
|
|
(13.9)
|
|
(15.4)
|
|
(13.8)
|
|
(14.1)
|
|
(14.0)
|
|
(16.3)
|
|
(15.5)
|
Other income (losses)
|
0.0
|
|
(0.2)
|
|
0.0
|
|
(0.5)
|
|
(0.5)
|
|
(0.4)
|
|
(0.8)
|
|
(0.5)
|
|
(0.1)
|
Loss from operation
|
(24.4)
|
|
(13.1)
|
|
(16.7)
|
|
(18.9)
|
|
(11.3)
|
|
(3.0)
|
|
(9.7)
|
|
(7.1)
|
|
(3.5)
|
Financial result, net
|
(0.6)
|
|
(1.4)
|
|
(4.7)
|
|
(5.4)
|
|
(0.2)
|
|
2.7
|
|
1.5
|
|
0.1
|
|
1.1
|
Equity results
|
0.2
|
|
0.2
|
|
0.2
|
|
0.3
|
|
0.3
|
|
0.3
|
|
0.3
|
|
0.4
|
|
0.3
|
Income (loss) before income tax
|
(24.8)
|
|
(14.3)
|
|
(21.2)
|
|
(24.1)
|
|
(11.2)
|
|
0.0
|
|
(7.9)
|
|
(6.6)
|
|
(2.1)
|
Income tax
|
2.8
|
|
3.7
|
|
2.1
|
|
2.6
|
|
(0.3)
|
|
(0.3)
|
|
(0.0)
|
|
0.0
|
|
(0.3)
|
Net loss for the period
|
(22.0)
|
|
(10.6)
|
|
(19.1)
|
|
(21.5)
|
|
(11.5)
|
|
(0.3)
|
|
(7.9)
|
|
(6.6)
|
|
(2.4)
|
Earnings (loss) per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted earnings (loss) per share (US$)
|
(0.12)
|
|
(0.06)
|
|
(0.10)
|
|
(0.11)
|
|
(0.06)
|
|
(0.00)
|
|
(0.04)
|
|
(0.04)
|
|
(0.01)
|
The following table sets forth selected condensed consolidated interim profit (loss) statements data for each of the periods indicated as a percentage of total revenue.
|
For the three months ended
(unaudited)
|
|
September 30, 2021
|
|
December 31, 2021
|
|
March
31, 2022
|
|
June
30, 2022
|
|
September 30, 2022
|
|
December 31, 2022
|
|
March
31, 2023
|
|
June
30, 2023
|
|
September 30, 2023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
100.0%
|
|
100.0%
|
|
100.0%
|
|
100.0%
|
|
100.0%
|
|
100.0%
|
|
100.0%
|
|
100.0%
|
|
100.0%
|
Subscription cost
|
(30.6)%
|
|
(28.2)%
|
|
(28.8)%
|
|
(26.3)%
|
|
(25.2)%
|
|
(25.3)%
|
|
(24.6)%
|
|
(23.3)%
|
|
(22.5)%
|
Services cost
|
(9.6)%
|
|
(8.9)%
|
|
(7.5)%
|
|
(7.3)%
|
|
(7.4)%
|
|
(6.8)%
|
|
(9.9)%
|
|
(9.1)%
|
|
(7.2)%
|
Total cost
|
(40.1)%
|
|
(37.1)%
|
|
(36.3)%
|
|
(33.6)%
|
|
(32.6)%
|
|
(32.1)%
|
|
(34.4)%
|
|
(32.4)%
|
|
(29.7)%
|
Gross profit
|
59.9%
|
|
62.9%
|
|
63.7%
|
|
66.4%
|
|
67.4%
|
|
67.9%
|
|
65.6%
|
|
67.6%
|
|
70.3%
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative
|
(31.2)%
|
|
(18.6)%
|
|
(19.9)%
|
|
(19.2)%
|
|
(17.9)%
|
|
(15.5)%
|
|
(18.7)%
|
|
(17.2)%
|
|
(16.5)%
|
Sales and marketing
|
(60.7)%
|
|
(47.0)%
|
|
(51.6)%
|
|
(55.1)%
|
|
(41.7)%
|
|
(27.3)%
|
|
(35.0)%
|
|
(30.2)%
|
|
(29.8)%
|
Research and development
|
(44.5)%
|
|
(32.1)%
|
|
(40.1)%
|
|
(39.8)%
|
|
(35.6)%
|
|
(30.9)%
|
|
(33.0)%
|
|
(34.0)%
|
|
(30.6)%
|
Other income (losses)
|
0.0%
|
|
(0.6)%
|
|
0.0%
|
|
(1.2)%
|
|
(1.3)%
|
|
(0.9)%
|
|
(1.8)%
|
|
(1.1)%
|
|
(0.2)%
|
Loss from operation
|
(76.5)%
|
|
(35.4)%
|
|
(48.1)%
|
|
(48.9)%
|
|
(29.1)%
|
|
(6.7)%
|
|
(23.0)%
|
|
(14.9)%
|
|
(6.9)%
|
Financial result, net
|
(1.8)%
|
|
(3.7)%
|
|
(13.5)%
|
|
(14.0)%
|
|
(0.5)%
|
|
5.9%
|
|
3.4%
|
|
0.2%
|
|
2.1%
|
Equity results
|
0.5%
|
|
0.5%
|
|
0.6%
|
|
0.7%
|
|
0.7%
|
|
0.8%
|
|
0.8%
|
|
0.8%
|
|
0.6%
|
Income (loss) before income tax
|
(77.7)%
|
|
(38.6)%
|
|
(61.1)%
|
|
(62.2)%
|
|
(28.9)%
|
|
0.1%
|
|
(18.7)%
|
|
(13.9)%
|
|
(4.2)%
|
Income tax
|
8.8%
|
|
10.0%
|
|
6.1%
|
|
6.8%
|
|
(0.9)%
|
|
(0.8)%
|
|
(0)%
|
|
0.1%
|
|
(0.5)%
|
Net loss for the period
|
(68.9)%
|
|
(28.6)%
|
|
(55.0)%
|
|
(55.4)%
|
|
(29.8)%
|
|
(0.7)%
|
|
(18.8)%
|
|
(13.8)%
|
|
(4.7)%
|
The following table sets forth our Non-GAAP income (loss) from operations for each of the periods indicated:
|
For the three months ended
(unaudited)
|
|
|
September 30, 2021
|
|
December 31, 2021
|
|
March
31, 2022
|
|
June
30, 2022
|
|
September 30, 2022
|
|
December 31, 2022
|
|
March
31, 2023
|
|
June
30, 2023
|
|
September 30, 2023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operation
|
|
(24.4)
|
|
(13.1)
|
|
(16.7)
|
|
(18.9)
|
|
(11.3)
|
|
(3.0)
|
|
(9.7)
|
|
(7.1)
|
|
(3.5)
|
Share-based compensation expense
|
|
9.3
|
|
1.6
|
|
2.5
|
|
0.9
|
|
4.8
|
|
4.6
|
|
5.1
|
|
4.7
|
|
4.6
|
Amortization and adjustment related to acquisitions
|
|
0.5
|
|
0.8
|
|
0.5
|
|
0.6
|
|
0.5
|
|
0.5
|
|
0.5
|
|
0.8
|
|
0.6
|
Offering expenses ("IPO") (i)
|
|
1.3
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
Non-GAAP Income (loss) from operation
|
|
(13.3)
|
|
(10.9)
|
|
(13.7)
|
|
(17.5)
|
|
(6.0)
|
|
2.1
|
|
(4.1)
|
|
(1.5)
|
|
1.7
|
(i) Offering expenses ("IPO") are related to shares offered by the selling shareholders and other one-off IPO expenses.
Components of our results of operations
The following is a summary of the principal line items comprising condensed consolidated interim income of profit and loss.
Total revenue
Our total revenue consists of (1) subscription and support revenue, arising from a multichannel cloud and SaaS-based platform focused on ecommerce; and (2) revenue from professional
services and other, arising substantially from consulting services.
Subscription revenue
Subscription revenue consists of revenue derived from (1) a mix of transaction-based fees and fixed subscription fees, in each case derived from customers using our platform; (2)
our SMB business; and (3) other business units that generate recurring revenue to us.
Transaction-based fees comprise (a) commission fees charged to customers based on a percentage of the GMV or a fee per order processed on our platform; and (b) commission fees
charged to marketplace partners, payment providers, and any other services provided through our app store.
Fixed subscription fees comprise (a) yearly or multi-year upfront fees paid by merchants to reduce future variable fees; and (b) fixed monthly fee for using our platform in any
given month. Fixed fees are paid to us at the beginning of the applicable subscription period, regardless of the length of the subscription period. As subscription fees are received in advance of providing the related services, we record deferred
revenue on our consolidated balance sheet for the unearned revenue and recognize revenue ratably over the related subscription period.
Services revenue
Services revenue consists primarily of revenue derived from consulting services which are recognized over time during the period that services are performed. Services revenue
accounted for 6.1% of our revenue for the three-month period ended September 30, 2023, compared to 5.8% in the same period of 2022. For the nine-month period ended on September 30, 2023, the consulting services revenue accounted for 6.2% of our
revenue, compared to 5.7% in the same period of 2022.
Cost of revenue
Our total cost consists of (1) subscription cost; and (2) services cost.
Subscription cost of revenue
Subscription cost consists mainly of costs related to hosting and customer support costs. The hosting related costs include third-party providers, software related platform
operating costs, and compensation for our infrastructure team. Support costs are mostly driven by personnel cost, and represent expenses related to the support we provide to our customers.
Services cost of revenue
Services cost consist mainly of personnel costs and/or third-party expenses to provide the professional services advisory for a specific project of a customer project.
Operating expenses
Our operating expenses consist of general and administrative expenses, sales and marketing expenses, and research and development expenses.
General and administrative expenses consist primarily of (1) personnel-related expenses (including stock-based compensation) for our finance, support operation departments, legal
and compliance teams; (2) corporate expenses; and (3) corporate overhead allocation. General and administrative expenses also include costs related to business acquisitions, legal and other professional services fees and depreciation and
amortization.
Sales and marketing expenses consist primarily of (1) personnel-related expenses (including stock-based compensation) and commissions paid to the direct sales team, the success
team, partnership sales team and sales enablement team; (2) travel-related expenses; (3) marketing and events expenses; (4) finder fee commissions; and (5) the allocation of corporate overhead. We plan to continue to incur sales and marketing
expenses in the regions that we currently have a presence as well as in new regions over time in order to continue to enhance our brand awareness and our capabilities to attract new customers.
Research and development expenses consist primarily of (1) personnel-related expenses (including stock-based compensation) for product development, product management and product
design; (2) software subscription costs related to the product; and (3) the allocation of corporate overhead. We expect to increase the research and development expenses to continue investing in product innovation, and in the development of new
products.
Financial results
Financial results consist of financial income and financial expenses. Financial income consists of interest earned on bank deposits, foreign exchange gains, short-term investment
gains and other financial income. Financial expense consists mostly of foreign exchange losses, short-term investment losses, losses from fair value of financial instruments, interest on lease liabilities and adjustment of hyperinflation in
Argentina.
Income tax
Provision for income taxes consists primarily of income taxes, current and deferred, in certain foreign jurisdictions in which we conduct business. The current and deferred income
taxes are calculated based on the tax laws enacted or substantively enacted at the end of the reporting period in the countries in which we operate and generate taxable income.
Currently we are running losses in most of our subsidiaries, and to that extent and considering the profitability expected in the foreseeable future our most relevant operation has
been booking the related tax losses as part of our deferred tax assets.
Historical operations results
Comparison of results of operations for the three and nine-month periods ended September 30, 2023 and 2022
The following table sets forth our condensed consolidated interim income statements for the three and nine-month periods ended September 30, 2023 and 2022. The period-to-period
comparison of financial results is not necessarily indicative of future results.
|
Three months ended
|
|
Nine months ended
|
(in US$ thousands)
|
September
30, 2023
|
|
September
30, 2022
|
|
September
30, 2023
|
|
September
30, 2022
|
Subscription revenue
|
47,544
|
|
36,513
|
|
132,078
|
|
105,743
|
Services revenue
|
3,084
|
|
2,241
|
|
8,718
|
|
6,392
|
Total revenue
|
50,628
|
|
38,754
|
|
140,796
|
|
112,135
|
Subscription cost (1)
|
(11,395)
|
|
(9,755)
|
|
(32,948)
|
|
(29,917)
|
Service cost (1)
|
(3,625)
|
|
(2,872)
|
|
(12,144)
|
|
(8,321)
|
Total cost
|
(15,020)
|
|
(12,627)
|
|
(45,092)
|
|
(38,238)
|
Gross profit
|
35,608
|
|
26,127
|
|
95,704
|
|
73,897
|
Operating expenses
|
|
|
|
|
|
|
|
General and administrative (1)
|
(8,374)
|
|
(6,944)
|
|
(24,541)
|
|
(21,296)
|
Sales and marketing (1)
|
(15,101)
|
|
(16,176)
|
|
(44,332)
|
|
(55,394)
|
Research and development (1)
|
(15,508)
|
|
(13,812)
|
|
(45,772)
|
|
(43,146)
|
Other losses
|
(99)
|
|
(489)
|
|
(1,364)
|
|
(954)
|
Loss from operations
|
(3,474)
|
|
(11,294)
|
|
(20,305)
|
|
(46,893)
|
Financial result, net
|
1,078
|
|
(190)
|
|
2,648
|
|
(10,337)
|
Equity results
|
281
|
|
272
|
|
989
|
|
759
|
Loss before income tax
|
(2,115)
|
|
(11,212)
|
|
(16,668)
|
|
(56,471)
|
Total income tax
|
(264)
|
|
(330)
|
|
(249)
|
|
4,374
|
Net loss for the period
|
(2,379)
|
|
(11,542)
|
|
(16,917)
|
|
(52,097)
|
(1) Includes stock-based compensation expenses as follows:
|
Three months ended
|
|
Nine months ended
|
(in US$ thousands)
|
September
30, 2023
|
|
September
30, 2022
|
|
September
30, 2023
|
|
September
30, 2022
|
Subscription cost
|
(90)
|
|
(171)
|
|
(196)
|
|
(338)
|
Service cost
|
(105)
|
|
(47)
|
|
(349)
|
|
(67)
|
General and administrative
|
(1,497)
|
|
(1,262)
|
|
(4,919)
|
|
(2,890)
|
Sales and marketing
|
(967)
|
|
(1,261)
|
|
(3,336)
|
|
(1,743)
|
Research and development
|
(1,934)
|
|
(2,027)
|
|
(5,598)
|
|
(3,128)
|
Total
|
(4,593)
|
|
(4,768)
|
|
(14,398)
|
|
(8,166)
|
Total revenue
The components of our total revenue during the three and nine-month periods ended on September 30, 2023 and 2022 were as follows:
|
Three months ended
|
|
Nine months ended
|
(in US$ thousands,
except percentages)
|
September
30, 2023
|
September
30, 2022
|
Variation
|
|
September
30, 2023
|
September
30, 2022
|
Variation
|
Subscription revenue
|
47,544
|
36,513
|
30.2%
|
|
132,078
|
105,743
|
24.9%
|
Services revenue
|
3,084
|
2,241
|
37.6%
|
|
8,718
|
6,392
|
36.4%
|
Total revenue
|
50,628
|
38,754
|
30.6%
|
|
140,796
|
112,135
|
25.6%
|
|
|
|
|
|
|
|
|
Total revenue for the three-month period ended September 30, 2023 was US$50.6 million, an increase of US$11.9 million, or 30.6% in US$ or 24.5% on an FX neutral basis, from US$38.8
million in the same period of 2022. The increase in total revenue was primarily driven by: an increase in GMV of 35.2% in US$ or 27.8% on an FX neutral basis to US$4.0 billion for the three-month period ended September 30, 2023, from US$3.0 billion
in the same period of 2022, which also led to higher revenues from transaction-based fees as percentage of total subscription revenues and the expansion of our operations outside of Brazil.
Total revenue for the nine-month period ended September 30, 2023 was US$140.8 million, an increase of US$28.7 million, or 25.6% in US$ or 23.2% on an FX neutral basis, from
US$112.1 million in the same period of 2022. The increase in total revenue was primarily driven by: an increase in GMV of 26.8% in US$ or 23.2% on an FX neutral basis to US$11.1 billion for the nine-month period ended September 30, 2023, from
US$8.8 billion in the same period of 2022, which also led to higher revenues from transaction-based fees as percentage of total subscription revenues and the expansion of our operations outside of Brazil.
Total cost
The components of our total cost during the three and nine-month periods ended on September 30, 2023 and 2022 were as follows:
|
Three months ended
|
|
Nine months ended
|
(in US$ thousands,
except percentages)
|
September
30, 2023
|
September
30, 2022
|
Variation
|
|
September
30, 2023
|
September
30, 2022
|
Variation
|
Subscription cost
|
(11,395)
|
(9,755)
|
16.8%
|
|
(32,948)
|
(29,917)
|
10.1%
|
Services cost
|
(3,625)
|
(2,872)
|
26.2%
|
|
(12,144)
|
(8,321)
|
45.9%
|
Total cost
|
(15,020)
|
(12,627)
|
19.0%
|
|
(45,092)
|
(38,238)
|
17.9%
|
Total cost for the three-month period ended September 30, 2023 increased by US$2.4 million, or 19.0%, to US$15.0 million from US$12.6 million in the same period of 2022, mainly
due to an increase in total cost of subscription by US$1.6 million.
Total cost for the nine-month period ended September 30, 2023 increased by US$6.9 million, or 17.9%, to US$45.1 million from US$38.2 million in the same period of 2022, mainly due
to an increase in total cost of services by US$ 3.0 million.
Gross profit
As a result of the above, our gross profit increased by US$9.5 million, or 36.3% to US$35.6 million for the three-month period ended September 30, 2023 from US$26.1 million in the
same period of 2022. As a percentage of our total revenue, our gross profit increased to 70.3% in the three-month period ended September 30, 2023 from 67.4% in the same period of 2022, mainly due to operational hosting cost efficiencies.
Our gross profit increased by US$21.8 million, or 29.5% to US$95.7 million for the nine-month period ended September 30, 2023 from US$73.9 million in the same period of 2022. As a
percentage of our total revenue, our gross profit increased to 68.0% in the nine-month period ended September 30, 2023 from 65.9% in the same period of 2022, mainly due to operational hosting cost efficiencies.
Operating expenses
General and administrative
General and administrative expenses during the three and nine-month periods ended on September 30, 2023 and 2022 were as follows:
|
Three months ended
|
|
Nine months ended
|
(in US$ thousands,
except percentages)
|
September
30, 2023
|
September
30, 2022
|
Variation
|
|
September
30, 2023
|
September
30, 2022
|
Variation
|
General and administrative
|
(8,374)
|
(6,944)
|
20.6%
|
|
(24,541)
|
(21,296)
|
15.2%
|
Percentage of total revenue
|
(16.5)%
|
(17.9)%
|
-
|
|
(17.4)%
|
(19.0)%
|
-
|
Our general and administrative expenses increased by US$1.4 million, or 20.6%, to US$8.4 million for the three-month period ended September 30, 2023 from US$6.9 million in the same
period of 2022, primarily due to the increase in expenses related to compensation, including share-based compensation.
For the nine-month period ended September 30, 2023, our general and administrative expenses increased by US$3.2 million, or 15.2%, to US$24.5 million from US$21.2 million in the
same period of 2022, primarily due to the increase in expenses related to compensation, including share-based compensation.
Sales and marketing
Sales and marketing expenses during the three and nine-month periods ended September 30, 2023 and 2022 were as follows:
|
Three months ended
|
|
Nine months ended
|
(in US$ thousands,
except percentages)
|
September
30, 2023
|
September
30, 2022
|
Variation
|
|
September
30, 2023
|
September
30, 2022
|
Variation
|
Sales and marketing
|
(15,101)
|
(16,176)
|
(6.6%)
|
|
(44,332)
|
(55,394)
|
(20.0)%
|
Percentage of total revenue
|
(29.8)%
|
(41.7)%
|
-
|
|
(31.5)%
|
(49.4)%
|
-
|
Our sales and marketing expenses decreased by US$1.1 million, or 6.6%, to US$15.1 million for the three-month period ended September 30, 2023 from US$16.2 million in the same period
of 2022, primarily due to the decrease in expenses related to compensation due to the reduction in our sales and marketing workforce as a result of the Company’s efforts to optimize its structure.
For the nine-month period ended September 30, 2023, our sales and marketing expenses decreased by US$11.1 million, or 20.0%, to US$44.3 million from US$55.4 million for the same
period of 2022, primarily due to (1) the decrease in expenses related to compensation due to the reduction in our sales and marketing workforce as a result of the Company’s efforts to optimize its structure, (2) the decrease in marketing and events
expenses and (3) the decrease in outsourcing expenses, which was partially offset by the increase in expenses related to share-based compensation.
Research and development
Research and development expenses during the three and nine-month periods ended on September 30, 2023 and 2022 were as follows:
|
Three months ended
|
|
Nine months ended
|
(in US$ thousands,
except percentages)
|
September
30, 2023
|
September
30, 2022
|
Variation
|
|
September
30, 2023
|
September
30, 2022
|
Variation
|
Research and development
|
(15,508)
|
(13,812)
|
12.3%
|
|
(45,772)
|
(43,146)
|
6.1%
|
Percentage of total revenue
|
(30.6)%
|
(35.6)%
|
-
|
|
(32.5)%
|
(38.5)%
|
-
|
Our research and development expenses increased by US$1.7 million, or 12.3% to US$15.5 million for the three-month period ended September 30, 2023 from US$13.8 million in the same
period of 2022, primarily due to the increase in expenses related to compensation.
For the nine-month period ended September 30, 2023, our research and development expenses increased by US$2.6 million, or 6.1%, to US$45.8 million from US$43.1 million in the same
period of 2022, primarily due to (1) the increase in expenses related to share-based compensation and (2) the increase in outsourcing expenses, which was partially offset by (3) the decrease in other expenses related to compensation and (4) the
decrease in IT expenses.
Financial results
The components of our financial results during the three and nine-month periods ended September 30, 2023 and 2022 were as follows:
|
Three months ended
|
|
Nine months ended
|
(in US$ thousands,
except percentages)
|
September
30, 2023
|
September
30, 2022
|
Variation
|
|
September
30, 2023
|
September
30, 2022
|
Variation
|
Financial income
|
8,974
|
7,137
|
25.7%
|
|
25,573
|
16,125
|
58.6%
|
Financial expense
|
(7,896)
|
(7,327)
|
7.8%
|
|
(22,925)
|
(26,462)
|
(13.4)%
|
Financial result, net
|
1,078
|
(190)
|
(667.4)%
|
|
2,648
|
(10,337)
|
(125.6)%
|
Our financial result amounted to a revenue of US$1.1 million for the three-month period ended September 30, 2023, compared to an expense of US$0.2 million in the same period of 2022
Our financial result amounted to a revenue of US$2.6 million for the nine-month period ended September 30, 2023, compared to an expense of US$10.3 million in the same period of
2022.
Explanations for the variations in the above referred period are set forth below:
Financial income
Financial income increased by US$1.8 million, or 25.7%, to US$9.0 million for the three-month period ended September 30, 2023 from US$7.1 million in the same period of 2022, mainly
due to (1) an increase in interest and dividends earned on bank deposits and financial investments to US$4.8 million in September 30, 2023 from US$0.3 million in September 30, 2022, which was partially offset by (2) a decrease in short-term
investments gains to US$1.8 million in September 30, 2023 from US$3.9 million in September 30, 2022 and; (3) a decrease in foreign exchange gains to US$1.1 million in September 30, 2023 from US$2.1 million in September 30, 2022.
Financial income increased by US$9.4 million, or 58.6%, to US$25.6 million for the nine-month period ended September 30, 2023 from US$16.1 million in the same period of 2022, mainly
due to (1) an increase in interest and dividends earned on bank deposits and financial investments to US$9.3 million in September 30, 2023 from US$0.6 million in September 30, 2022 and; (2) an increase in short term investments gains to US$8.3
million in September 30, 2023 from US$5.3 million in September 30, 2022, which was partially offset by (3) a decrease in gains from fair value of financial instruments to US$1.9 million in September 30, 2023 from US$4.1 million in September 30,
2022.
Financial expense
Financial expense increased by US$0.6 million, or 7.8%, to US$7.9 million for the three-month period ended September 30, 2023 from US$7.3 million in the same period of 2022, mainly
due to (1) an increase in adjustment of hyperinflation to US$5.4 million in September 30, 2023 from US$1.7 million in September 30, 2022, which was partially offset by (2) a decrease in short-term investment losses to US$0.2 million in September
30, 2023 from US$3.2 million in September 30, 2022;
Financial expense decreased by US$3.5 million, or 13.4%, to US$22.9 million for the nine-month period ended September 30, 2023 from US$26.5 million in the same period of 2022,
mainly due to (1) the decrease in short-term investment losses to US$1.4 million in September 30, 2023 from US$13.7 million in September 30, 2022 and; (2) the decrease in losses from fair value of financial instruments to US$1.0 million in
September 30, 2023 from US$2.3 million in September 30, 2022, which was partially offset by (3) an increase in foreign exchange losses to US$9.4 million in September 30, 2023 from US$5.6 million in September 30, 2022 and; (4) an increase in
adjustment of hyperinflation to US$10.2 million in September 30, 2023 from US$3.8 million in September 30, 2022.
The following tables show the unrealized gain and loss position recorded in our Balance Sheet as at September 30, 2023 and December 31, 2022:
|
|
As at September 30, 2023
|
|
|
Amortized cost
|
|
Gross
unrealized gain
|
|
Gross
unrealized loss
|
|
Fair value
|
Short-term investments
|
|
91,597
|
|
3,862
|
|
-
|
|
95,459
|
|
|
|
|
|
|
|
|
|
|
|
As at December 31, 2022
|
|
|
Amortized cost
|
|
Gross
unrealized gain
|
|
Gross
unrealized loss
|
|
Fair value
|
Short-term investments
|
|
208,177
|
|
1,013
|
|
(5,145)
|
|
204,045
|
|
|
|
|
|
|
|
|
|
Net loss for the period
As a result of the above, our net loss amounted to US$2.4 million for the three-month ended September 30, 2023, compared to US$11.5 million in the same period of 2022.
As a result of the above, our net loss amounted to US$16.9 million for the nine-month period ended September 30, 2023, compared to US$52.1 million in the same period of 2022.
Condensed consolidated interim statements of cash flows
The following table sets forth certain condensed consolidated interim cash flow information for the periods indicated:
|
For the nine months ended
|
(in US$ thousands)
|
September 30, 2023
|
|
September 30, 2022
|
Net cash used in operating activities
|
(5,422)
|
|
(31,808)
|
Net cash provided by (used in) investing activities
|
30,294
|
|
(46,102)
|
Net cash used in financing activities
|
(27,214)
|
|
(10,456)
|
Net decrease in cash and cash equivalents
|
(2,342)
|
|
(88,366)
|
Net cash used in operating activities
For the nine months ended September 30, 2023, net cash used in operating activities decreased by US$26.4 million to US$5.4 million, from US$31.8 in the same period of
2022, primarily as a result of:
•
|
(1) a decrease in net loss of the period to US$16.9 million for the nine-month period ended September 30, 2023, compared to a net loss of US$52.1 in the same period of 2022
|
•
|
(2) working capital adjustments which consisted mainly of an increase in deferred revenue in the amount of US$5.5 million for the nine-month period ended September 30, 2023, compared to an
increase of US$0.0 million in the same period of 2022. This was partially offset by:
|
•
|
(3) working capital adjustments which consisted mainly of an increase in trade receivables in the amount of US$6.8 million for the nine-month period ended September 30, 2023, compared to an
increase of US$0.6 million in the same period of 2022.
|
Net cash provided by (used in) investing activities
For the nine-month period ended September 30, 2023, net cash provided by (used in) investing activities increased by US$76.4 million to US$30.3 million of net cash provided by
investing activities from US$46.1 million of net cash used in investing activities in the same period of 2022, primarily as a result of an increase in the redemption of short-term investments to US$139.5 million for the nine-month period ended
September 30, 2023, from US$66.2 million in the same period of 2022.
Net cash used in financing activities
For the nine-month period ended September 30, 2023, net cash used in financial activities increased by US$16.8 to US$27.2 million, from US$10.5 million in the same period of 2022,
primarily as a result of the buyback of shares in the amount of US$25.1 million for the nine-month period ended September 30, 2023, from US$5.2 in the same period of 2022.
Capital expenditures
Our capital expenditures, consisting of purchase of property and equipment and intangible assets, for the nine-month periods ended September 30, 2023 and 2022, amounted to US$0.3
million and US$0.3 million, respectively, representing 0.2% and 0.2% of our total revenue for the nine-month periods ended September 30, 2023 and 2022, respectively.
We expect to slightly increase our capital expenditures to support the growth in our business and operations.
Off-balance sheet arrangements
As of September 30, 2023, we did not have any off-balance sheet arrangements.
Quantitative and qualitative disclosures about market risk
We are exposed to market risks in the ordinary course of our business, including the effects of foreign currency fluctuations, derivative financial instruments, credit risk and
liquidity risk. Information relating to quantitative and qualitative disclosures about these market risks is described below:
Interest rate risk
The interest risk arises from the possibility of us incurring losses due to fluctuations in interest rates in respect of fair value of future cash flows of a financial instrument.
Our investments are made for capital preservation purposes and we do not enter into investments for trading or speculative purposes. Our trade receivables, accounts payable and
other liabilities do not bear interest.
Our cash, cash equivalents, restricted cash, and short-term investments consist primarily of interest-bearing accounts held by our parent company in USD. Such interest-earning
instruments carry a degree of interest rate risk. To minimize interest rate risk, we intend to maintain our portfolio of cash equivalents in a variety of investment-grade securities, which may include commercial papers, money market funds, and
government and nongovernment debt securities. Because of the short-term maturities of our cash, cash equivalents, restricted cash, and short-term investments, as of September 30, 2023, we are not materially exposed to the risk of changes in market
interest rates.
Foreign currency exchange risk
We have significant operations internationally that are denominated in foreign currencies. Our exposure to foreign exchange risk is primarily related to fluctuations between the
U.S. Dollar and the currency of Latin American countries in which we operate (primarily the Brazilian real, Argentine peso, Colombian peso and Chilean peso). We transact business in various foreign currencies and have significant international revenues and costs. Our cash flows, results of operations and some of our
intercompany balances are exposed to foreign exchange rate fluctuations that may differ materially from expectations. We may record significant gains or losses due to foreign currency fluctuations and related hedging activities.
Our subsidiaries determine their functional currency based on the currency that mostly impacts their economic environment. As a result, they generate revenues and incur expenses in
currencies other than the Group’s presentation currency. As of the nine-month period ended September 30, 2023 and in the year ended December 31, 2022, 20.7% and 15.6% of our revenues were denominated in, or linked to, U.S. dollars, respectively. As
of September 30, 2023 and in the year ended December 31, 2022, our assets were represented by 60.4% and 66.1% in U.S. dollars, 39.6% and 33.9% in other currencies. As of September 30, 2023 and in the year ended December 31, 2022, our liabilities,
excluding our total shareholders’ equity, were represented by 13.7% and 13.2% in U.S. dollars, 86.3% and 86.8% in other currencies.
We are exposed to foreign exchange fluctuations on the revaluation of foreign currency assets and liabilities. We use foreign exchange derivative products to hedge the risk of
currency devaluation and hyper-inflation. By their nature, derivative financial instruments involve risk, including the credit risk of non-performance by counterparties. We use derivatives for hedging purposes and not as speculative investments.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereto duly authorized.
Date: November 7, 2023
|
VTEX |
|
|
|
|
|
|
|
By:
|
/s/ Ricardo Camatta Sodre |
|
|
|
|
|
|
|
Name: |
Ricardo Camatta Sodre |
|
Title: |
Chief Financial Officer |