Geraldo Thomaz Jr. - Co-CEO, Co-Founder Ricardo Camatta Sodré - Finance Executive Officer Andre Spolidoro - Chief Financial Officer Mariano Gomide de Faria - Co-CEO, Co-Founder Julia Vater Fernández - Investor Relations Director Julia Vater Fernández: Hello everyone, and welcome to the VTEX Earnings Conference Call for the quarter ended September 30, 2021. I am Julia Vater Fernández, Investor Relations Director for VTEX. Our senior executives presenting today are Geraldo Thomaz Jr., Co-CEO and Co-Founder, and Ricardo Camatta Sodré, Finance Executive Officer. Additionally, Andre Spolidoro, Chief Financial Officer, will be available during today’s Q&A 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, 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 lieu of the currently available information, you are cautioned not to place undue reliance on these forward-looking statements. Certain risks and uncertainties are described under Risk Factors and Cautionary Statement Regarding Forward-Looking Statements sections of VTEX’s registration statement on Form F-1/A and other VTEX’s 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 may discuss some non-GAAP measures. A reconciliation of those measures to the nearest comparable GAAP measures can be found in the third quarter 2021 earnings press release available on our investor relations website. Now, let me turn the call over to Geraldo. Geraldo the floor is yours.

Thank you, Julia. Welcome everyone, and thanks for joining us today in our 2021, quarter three earnings results. I’m excited to announce our progress in making VTEX the platform designed to be the Operating System for the commerce ecosystem. Strong execution enabled us to move closer towards our desired future. This quarter we had outstanding new contract signatures, we increased our backlog of new online stores under implementation, and we expanded our relationship with existing customers. We also continued launching product development and signing important partnerships that position ourselves towards creating the future proof platform of choice for enterprise brands and retailers. Finally, we also over delivered the guidance we provided to the market. We will cover all of these points and more throughout today’s call. So I invite you to stay with us for the next hour to hear more about our progress and the principles guiding our strategic actions. Exciting times are here to come. Last year we witnessed the surge in ecommerce as the consumer behavior shifted towards preferred and convenient online shopping and that trend is here to stay. As a consequence, our business is showing strong momentum, both in the top line growth, as well as with new contract signatures, and this is just the tip of the iceberg. Ecommerce in Latin America is still an untapped opportunity. According to eMarketer 2021 report, Latin America is the fastest growing region in the world, with almost 10 percentage points higher growth than the worldwide average. We are living in a new era, a revolution, and we are here to accelerate it. We continued attracting premier brands to our platform across the globe. Some new customers that went live this quarter that didn’t have online presence in the region before were: Ronald McDonald's Institute in Brazil, Whirlpool…

[Operator Instructions]. Our first question comes from Sterling Auty of J.P. Morgan. Your line is open. Please go ahead.

Yeah thanks, hi guys. So one question, one follow-up. Just curious in terms of the GMV would you expect that the third quarter would be the bottom in terms of GMV growth? You mentioned the revenue acceleration expected in December. Would you expect the GMV growth to accelerate as well. Ricardo Camatta Sodré: Yeah, hi Sterling. Great to speak with you, thanks for the question. Yeah Sterling, GMV growth also should be the bottom for Q3. We are already seeing an acceleration of GMV, as well as we mentioned for revenue. As you probably remember, to set the foundation roughly two-thirds of our revenue comes from a take rate on our customers GMV. So this two are tightly connected, right, and we are seeing a pick-up in GMV and that's driving recovery on the revenue growth as well. And as we mentioned there are supply chain impacts that can have some impacts on this GMV growth, but we are seeing strong pickup in October and we feel confident for November and going forward.

Thanks a perfect Segway. My follow up question was actually about that take rate. If I look at the subscription revenue in the quarter, coming in where it did despite GMV maybe being a little bit below what we would have expected, was there a difference in mix in terms of take rate versus kind of the straight subscription fee that you saw in the quarter or what else kind of drove that strength in subscription revenue? Ricardo Camatta Sodré: Yeah, great question. So as you probably remember, our revenue is driven by the existing customers and the new customers, and as new customers are coming online, they have slightly higher take rate because they are paying a rate to fixed fee, but they are not yet bringing a lot of GMV to the platform, right. So the implied take rate of new customers is higher than for existing customers and as they ramp up their GMV which takes you know roughly six months, sometimes a year, they trend towards the average take rate of the company or the long term take rate that they will have, right. So this is likely higher implied take rate that you are mentioning is mostly driven by, you know more new customers joining the platform, which we see as an encouraging trend and I think we mentioned during the prepared remarks that we are seeing strong sales momentum and that our backlog doubled on a dollar amount on a year-over-year basis. So this is an encouraging trend that we are seeing.

Understood, thank you.

Our next question comes from Josh Beck of Keybanc. Your line is open. Please go ahead.

Many thanks for taking the question. I wanted to follow up on your last point there, which I think you both had mentioned, around the backlog doubling. So maybe just help us double click there. If you were to look at maybe the verticals where you are seeing the momentum or the geography, any other really stand outs underneath that backlog strength? A - Ricardo Camatta Sodré: Yeah, I'm happy to take this one and then others on the call, if they want to chime in, please feel free. So Josh, it’s across the board. It's not specific to one segment, so the VTEX platform works well across different industries and we are expanding globally. We are seeing strong momentum and continue to see very strong momentum in Brazil where we have a strong market share. So the backlog in Brazil has increased and we see further opportunity to continue growing in Brazil. As you know, we are investing a lot in Latin America outside of Brazil. We pretty much tripled our sales and marketing investments in Latin America outside of Brazil, if you look at over the past 12 months. So as expected, these additional sales and marketing team is bringing pipeline and is bringing new opportunities, and these are getting signed and this goes into the backlog. And just to take a step back on the sales cycle right, it takes on average six months between the RFP launch and the contract signature, and then that customer stays in the backlog for an average of six months, because the contract is signed and it takes about six months for the contract, the store to go-live, right. And because we increased a lot our investments in Latin America, outside of Brazil, a lot of the backlog increase was driven by Latin America, outside of Brazil. But we are also seeing increase in backlog in Brazil and outside of the region, outside of Latin America as well. So on segment and industries, not specific to one industry, it’s across the board. On geographies we see a good trend in the geographies, but we see you know a bigger increase in Latin America, outside of Brazil, given that’s the region that we made most of our sales and marketing investments.

Fantastic! Very good to hear about that momentum. I wanted to follow up on the supply chain impact as we've gone through this earnings season. It has been really varied. I feel like some of the really large enterprise companies, even Wal-Mart and Target this week have said their inventory levels are well positioned for the holiday season. So I think in the true enterprise, those are the dynamics. I think once you get into SMB right, there's probably less preparation. So I'm just curious, as you look into next year, do you feel like for maybe the customers that had supply chain issues that there could be some type of overhang and the metric that I'm really trying to think through is net revenue retention. If we should maybe factor in some type of impact to some of those non-enterprise customers as we start to think about next year. A - Ricardo Camatta Sodré: Yeah Josh, thanks for the question. It's very hard to answer this precisely, right. I mean what I can share what we saw during Q3 and how we are starting to see the performance of Q4. The supply chain issues impacted mostly the electronics and home appliances, and although these are you know enterprise customers and they can prepare and they can – you know they have more better processes around supply chain planning and they can foresee some of these trends before some of this. And B) it ships out of stock or if they can just get the raw materials to make their products, that does impact a little bit this company, right. So as we are seeing these two key segments being impacted, we are also seeing now in Q4, stronger growth in their GMV than we were expecting, so it's hard to say if they are recovering. I think it's early for that, but maybe they were stocking for these holiday season for – should be ready for this important moment for the industry, right. Now looking forward to 2022 and the mass revenue retention, I mean we would love to have more insight on that, but I think it’s very early to know how these trends will evolve, but we do like the perspective that the enterprise customers bring because of their processes and their preparation, and being able to be more prepared and control their inventory so they have less ruptures than some other smaller players may feel, right. So we like our customer base and we like how they try to position themselves, and we try to stay very close with them on how they are preparing and stocking for the holiday season, understanding also their planning for the season, right. I mean there is some uncertainty in that. There's always uncertainty on these topics, but we try to stay close with them, so we can help them get the best GMV possible during this season.

Very helpful context. Thank you, team.

Our next question comes from Diego Aragao of Goldman Sachs. Your line is open. Please go ahead.

Yes, good morning everybody. Thanks for taking my question. Actually the first question is regarding the current macroeconomic environment in Brazil. We are now seeing inflation picking up in the country, partially due to and by the BRL devaluation. So I was just wondering if you can comment on how these probably two factors could end up impacting your business in the short term. Thank you.

Yeah, thanks Diego. So first on the FX devaluation, right, I think as we mentioned on the earnings release, there was meaningful devaluation of the Latam currencies during Q3, right. Roughly 6.7% of devaluation already has a weighted average by the VTEX revenue by currency, right. And for example if you take Brazil as you mentioned, FX in Brazil was 5 reals [ph] to the dollar in June 30, and then I think like almost 5.44 by September 30. So it's almost like 9% devaluation during the quarter. And even though there was the 6.7% devaluation, which would impact our Q4 revenue in dollar amounts, so it reduced our expected revenue for Q4, just because of currency variable that we don't control, we are keeping the guidance right for the year, right. So yes, in the short term there are currency impacts on our business. But if you think about long term and VTEX being a high growth company and their inflation differential being a couple of percentage points that it has been historically, FX is not an important driver for us. There is volatility and in our quarter, in the short term you may see some impacts, but in the long term high growth company with FX being a couple of percentage points impacts per year, we don't see as a meaningful long term impact, but again in the short term including factors. Quickly on inflation, I mean we are seeing inflation, it's not just in Brazil, right. I mean it's a global phenomenon. You know you can also see inflation in the U.S. picking up. In Brazil it’s may be slightly higher, on the 10% LTM, but the U.S. is at 6% or so, right. Anything [inaudible] should mention that the way our business model is designed, we are very well protected against deflation, because two-thirds of our revenue comes from take rate on our customers GMV and as inflation impacts the economy, the GMV of our customers increases naturally, because they are selling the goods that’s driving this deflation, right, and we captured this automatically because of our business model. It’s not a renegotiation of a contract of trying to increase prices or anything like that. It just flows through because of the take rate. So although we are seeing the deflation impacting the global economy, we feel well position because of the business model that we have. But let me pause here. I don’t know Geraldo if you want to add a few more thoughts on the topic.

Yeah Ricardo, your point that, your point is exactly what I was going to talk about. There is several reasons why we like to take rates component in our subscription revenue. One of them, the biggest one is the line of interest, the other one is that we truly believe that in the long term GMV of commerce will growth much more than any other metric. But also when we started building a business model based on GMV, you know like Mariano and I, we are here for 20 years. We saw the hyperinflation in Brazil, the inflation and usually inflation in countries like ours or inflation with stagnation. So it’s very difficult to renegotiate content in this period where you have inflation and recession as the same time. And so this basis model that we have also protect us from charging less in real terms in the long term, because we naturally adjust the [inaudible] the agreement with our customers because of this company. So I do believe that in this sense, especially in the long term this company is kind of protected against the bad effect of pressuring the suppliers, in our case us, because of the inflation.

That’s very, very helpful. Thank you Geraldo and Ricardo. Maybe just a follow-up question regarding the GMV, as it seems, I guess incinerated sequentially in the third quarter, so I’m not sure, I think this was driven by FX movements and BRL devaluation as well. Maybe if you can just help us to understand the trends in there and comment on the performance, opportunity by client vertical and different industries, I think that would be great. Thank you. Ricardo Camatta Sodré: Yeah Diego, thanks for the question, and as you can image, its very hard to precisely calculate the impact of some of these supply chain challenges or lower consumer confidence that we are seeing in some countries. As they are you know intertwined with other variables and doing the sector analyses it's almost impossible. But having said that, right, historically seasonality that Q3 GMV is usually slightly higher than Q2 GMV and this year it was actually roughly $150 million lower, and doing some round number calculations, if you divide our revenue by our GMV you get to an average take rate of roughly 1.3% and you have to remember that only two-thirds of our revenue is based on GMV. Thus you know, if you reduce 1.3% on the $150 million lower GMV that we don’t control, you know it’s driven by the market rate in some way and you multiply by this two-thirds that I mentioned it's almost $1.5 million directional impact of these events in the quarter. And this was mostly as we said you know home appliances and electronics, a little bit on furniture and I mean, there is this short – potential short term impact being exposed though GMB, but we love that for the long term, because as Latin America is very underpenetrated and as these penetration increase over time and the GMV increases, we naturally capture that growth in our revenue growth. So we like having these GMV exposure, but it’s a variable that we don't control and during these marker events it could have some impact. But even considering this directional impact that I mentioned, we over deliver the guidance with $31.9 million in a range that was from $31 million to 31.5 million.

Ricardo’s point is very good. We don’t control in the short term and naturally we don't control in the longer term, but we have a good bet that in the long term GMV, tagging our revenue to GMV is a big deal. Eventually in order to have this big disruption because of all the supply chain just after COVID and we had this very small impact in our revenue, just the short term. So we were beating the guidance and everything. It’s not that it’s the end of the world, but in the long term we are very optimistic to be attached to the GMV of our customers.

That's very helpful. Thank you both for answer, very clear. Thank you.

[Operator Instructions]. We have a question from Fred Mendes of Bank of America. Your line is open, please go ahead.

Hello everyone! Good morning and thanks for the call. I had two questions as well. The first one, sales and marketing expense increased almost 20% quarter-over-quarter. Just wondering, are you guys expanding this marketing campaign or is it best to describe of the digital channels that are let’s say more expensive and let's say you are doing kind of the same, but it’s taking a little bit more on this front, this will be my first question. And then on the second question, I think this is a more strategic one. If you look at headcounts of 1,600 employees you almost doubled over the last 12 months. So just wondering, do you see your growth [inaudible] or should you continue to see the headcount to increase over the next quarter. This will be my second question. Thank you.

Hi! Mariano here. I am a Co-Founder and Co-CEO, just introducing myself. The S&M, the most part of the S&M investment it is in people. So we are seeing an increase on the opportunities arriving on VTEX and we need to prepare the people for this. So the most part of the investment is directly to people.

It is important to highlight Fred. Sorry to cut in Ricardo, buts it’s important to highlight that this company is very much sensitive to digital market. Most of our investment in S&M is people. We don’t buy ad words; we don’t buy digital channels to sell. This is like almost irrelevant to our expenses in sales and marketing, because we are mostly a fields based company and an ecosystems based company.

To be more precise, maybe it’s a counter solution engineering CSM’s, people that are people that are engaging on the potential, not surviving.

Perfect! Thanks Mariano, I think those are very clear. And then on the second one, in terms of the headcount, you already have been at an optimal level or as you continue to develop product, I mean how will you as you growth be hiring more people. Does this volume that we have seen recently, should it continue or I believe they are already at the optimal level for the size that you are. Thank you. Ricardo Camatta Sodré : Yeah, happy to take the question, Fred and thanks for the question. So as we explain growing the IPO process in the last quarter, we are seeing a very strong opportunity for us to capture in the market, right. As the pandemic completely shifted the mindset of the C-level and Board Members of these enterprises, and they are accelerating their digital transformation. We are in a market where penetration is very low. Our unit economic is very attractive, and the customer is very sticky, right. Our churn continues to be mid-single digits, right. So with these all said, it makes a lot of sense for us to invest now and capture these opportunity and bring the customers to VTEX. As we mentioned, roughly half of new customers are greenfield, so we want to capture them first, than trying to steal these customers from another platform, and the switch in cost plays both ways, right. Once the customer joins our platform, they tend to stay with us, but it's also hard to take customers from other platforms. I mean we have been successful in doing it, but you have to be at the right time at the right place and the customer needs to be feeling some type of pain, like trying to do omnichannel solution or escaping a Black Friday and not being able to and those switch to us. So anyway, it makes a lot of sense for us to invest now to capture this customer and that’s why we have been over the past year now as we start to accelerate expenses in Q3 last year. So we see that we did a lot of the heavy lifting already. As you said, we almost doubled the headcounts year-over-year. Going forward we don't see the same pace of increase in headcounts, but we feel there is an opportunity to continue investing and as we are seeing a strong sales momentum and we are seeing our backlog increasing, we feel it's important to invest, to continue capturing this opportunity and driving the growth of the company going forward.

This is perfect! Thank you Ricardo, thank you. [End of Q&A]:

There are no other questions on the lines at this time. So I'll turn the call back over to Geraldo.

Thank you very much. So I think I want to make sure that I have this opportunity that I have to finalize the call, to thank you all again for joining our earnings call conference. This is our first step as a public company. We are very happy and humbled to share this steps with you. VTEX’s ambitions were always sizeable and you are enabling us to dream even bigger. Thank you for that and for accompanying such an important moment. We will continue executing with the highest standards to continue to be the best partner for enterprises to do bigger in this new digital era. Thank you very much. See you next quarter.

This concludes today’s call. Thank you for joining. You may now disconnect your lines.