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01/10 05:51
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call presents mixed signals. Strong financial metrics such as increased gross profit, operating income, and cash flow indicate positive performance. However, the decline in guidance due to challenges in Argentina and Brazil, combined with competitive pressures in mature markets, tempers enthusiasm. The Q&A reveals concerns about regional volatility and cautious outlooks, balancing the positives with uncertainties. Given the company's market cap, the stock is likely to experience a neutral reaction in the short term, with potential fluctuations as investors digest the guidance and regional challenges.
Subscription Revenue $57.2 million, representing an 11% year-over-year increase in FX neutral. The growth was within guidance in U.S. dollars but below on an FX-neutral basis. The performance was impacted by Argentina's economic challenges and a mix shift in Brazil towards new and larger customers with lower implied take rates.
Gross Profit $45.3 million, up 15.2% in FX neutral, representing a 3.5 percentage points margin increase year-over-year. This was driven by strong financial discipline and operational leverage.
Non-GAAP Income from Operations $8.5 million, representing a 46% increase in FX neutral and a 14.4% margin, with a 3.3 percentage points margin increase year-over-year. This was attributed to resilient operational profitability and stable churn levels.
GMV (Gross Merchandise Volume) $4.8 billion, growing 9% year-over-year in U.S. dollars and 14% on an FX-neutral basis. Growth was driven by a mix shift in Brazil and challenges in Argentina.
Non-GAAP Subscription Gross Margin 80%, up 180 basis points year-over-year from 78% in Q2 2024. This was driven by gains in customer support efficiency and AI-powered automation.
Total Gross Margin 77%, up 350 basis points year-over-year compared to 74% in Q2 2024. This was due to subscription gross margin gains and a declining mix of services revenue.
Non-GAAP Operating Expenses $37.0 million, representing a 4% increase year-over-year. Efficiency in G&A and sales and marketing expenses contributed to a 2 percentage point reduction in their combined weight as a percentage of total revenue.
Free Cash Flow $7.1 million, up from $3.0 million in the same quarter of last year, resulting in a free cash flow margin of 12%, an improvement of 7 percentage points year-over-year. This was due to disciplined capital allocation and operational efficiency.
B2B commerce: Introduced a re-architected B2B buyer portal with features like multilevel organizational management, budgeting controls, and approval-based workflows. This allows large organizations to scale purchasing efficiently.
Retail media: Launched VTEX Ads as a monetization engine with features like video ad formats and in-store media activations. Partnered with Globo to integrate VTEX Ads with Brazil's largest media network.
Omnichannel commerce: Introduced AI-powered semantic search, product recommendations, and in-store innovations like Tap on Phone for secure payments. Enhanced delivery promise feature for better fulfillment options.
Agentic commerce: Launched AI agents for automating workflows, including customer service, visual editor, and data insights agents. These innovations aim to reduce complexity and improve operational agility.
Global expansion: Expanded partnerships in the U.S. and Europe, including Whirlpool's KitchenAid website launch in the U.S. and new enterprise customers in both regions. U.S. and Europe markets are growing twice as fast as the overall company.
New customer acquisitions: Added several new customers globally, including Alo Yoga, Lindt in Brazil, ShopAZ in Kosovo, and Delta House in Portugal. Strengthened relationships with existing customers like Hinode Group and Keune.
Operational profitability: Raised non-GAAP income from operations and free cash flow guidance by over 10%. Achieved a 14.4% non-GAAP operating margin, up 3.3 percentage points year-over-year.
Cost efficiency: Improved customer support efficiency through AI-powered automation, leading to an 80% non-GAAP subscription gross margin, up 180 basis points year-over-year.
Strategic initiatives: Investing in B2B commerce and retail media to unlock new revenue streams. Focused on innovation and scalability to strengthen market positioning.
Share repurchase program: Concluded a share repurchase program, buying back 0.8 million shares at an average price of $4.82 per share. Authorized an additional $40 million share repurchase program.
Market Challenges in Brazil and Argentina: The retailer base in Brazil and Argentina is facing a challenging market environment, with high-interest rates in Brazil and a reversal of recovery trends in Argentina, impacting GMV growth and revenue contributions.
FX-Neutral Revenue Growth: Subscription revenue growth was below expectations on an FX-neutral basis, driven by market volatility and economic conditions in key regions.
Customer Mix Shift: A mix shift in Brazil towards new and larger customers with lower implied take rates has limited revenue growth despite maintaining similar margins.
Economic Volatility in Argentina: The reversal of recovery trends in Argentina has introduced headwinds to GMV and revenue growth, reflecting broader economic instability.
Slower Decision-Making Cycles: Retailers and brands are exhibiting slower decision-making cycles, which has impacted contract signings and near-term revenue forecasts.
Contract Cancellations: Isolated contract cancellations have added to the challenges in achieving revenue targets.
Global Expansion Risks: While global expansion in the U.S. and Europe shows promise, it also introduces risks related to execution and market penetration in competitive regions.
Regulatory and Compliance Risks: Expanding into new markets and introducing new products like B2B commerce and retail media may face regulatory and compliance challenges.
Operational Scalability: The need to maintain operational scalability while expanding globally and introducing new innovations could strain resources and execution capabilities.
Non-GAAP income from operations and free cash flow guidance: Raised by over 10%.
Global expansion: U.S. and Europe markets are growing twice as fast as the overall company.
Subscription revenue growth (Q3 2025): Targeting FX-neutral year-over-year growth in the range of 6% to 9%, implying $57.5 million to $59.0 million.
Full-year 2025 subscription revenue growth: Targeting FX-neutral year-over-year growth of 9% to 12%, implying $233 million to $239 million based on July's average FX rate.
Full-year 2025 margin outlook: Raising non-GAAP income from operations and free cash flow margins to the high teens.
Share Repurchase Program: This quarter, we concluded the share repurchase program authorized by our Board of Directors in December 2024, executed as part of our broader capital allocation strategy to maximize shareholder returns. In Q2, we repurchased 0.8 million shares at an average price of $4.82 per share. Considering the current and the previous year's share repurchase activities, total shares repurchased reached $16.0 million with an average price of $4.86 per share and a total cost of $78.2 million. On July 31, 2025, our Board of Directors authorized an additional share repurchase program for an aggregate consideration of up to $40 million.
The earnings call highlights strong financial performance, with significant growth in non-GAAP net income and gross margins. The company is expanding globally, particularly in the U.S. and Europe, and increasing R&D for AI integration. Despite challenges in Argentina and LatAm, the company maintains stable churn and a positive outlook. The raised guidance for non-GAAP income and free cash flow, along with strong U.S. operations, supports a positive sentiment. The market cap suggests a moderate reaction, leading to a 'Positive' prediction for stock price movement.
The earnings call presents mixed signals. Strong financial metrics such as increased gross profit, operating income, and cash flow indicate positive performance. However, the decline in guidance due to challenges in Argentina and Brazil, combined with competitive pressures in mature markets, tempers enthusiasm. The Q&A reveals concerns about regional volatility and cautious outlooks, balancing the positives with uncertainties. Given the company's market cap, the stock is likely to experience a neutral reaction in the short term, with potential fluctuations as investors digest the guidance and regional challenges.
The earnings call highlights strong financial performance with impressive growth in subscription revenue and gross profit margins. The company also announced a significant share repurchase program, which typically boosts investor confidence. However, concerns about macroeconomic volatility, competitive pressures, and regulatory issues slightly temper the outlook. The Q&A section revealed management's strategic focus on R&D and expansion, which are positive indicators. Given the company's market cap of approximately $1.3 billion, these factors suggest a positive stock price movement of 2% to 8% over the next two weeks.
The earnings call reveals mixed signals: flat GMV growth, revenue below expectations, but strong subscription growth and improved margins. The Q&A highlights concerns about Brazil's economic environment, but also optimism for US market opportunities. The market cap indicates a moderate reaction, likely resulting in a neutral stock price movement.
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