Vtex Q3 FY2025 earnings call

• Profitability improved meaningfully with non-GAAP subscription gross margins above 80% and non-GAAP operating margin at 16%. AI-powered support automations drove efficiency gains. - Gradual ramp-up of high potential revenue streams with focus on 4 growth pillars: global expansion, B2B use case customers, retail media and Agentic commerce. For example, global expansion made progress with multibillion-dollar U.S. enterprise implementation and wins in Brazil like H&M, Itau and Picpay. - Celebrated several important go-lives from new customers and deepened relationships with existing customers. VTEX Connect LATAM in Mexico City had record scale. - Customer success stories like Etihad Arena, Itau Shop, etc., showcasing VTEX's capabilities in different business models.

In Q3 2025, GMV reached $5.0 billion, up 13% in U.S. dollars and 12% FX neutral. Subscription revenue was $58.4 million versus $53.9 million in Q3 2024, an increase of 8% in U.S. dollars and 7% FX neutral. Non-GAAP subscription gross margins exceeded 80% for the first time, and non-GAAP operating margin was 16%. Non-GAAP net income reached $10.6 million, a 41% growth year-over-year. The revenue contribution comes from various segments including subscription revenue, GMV from different regions, etc.

• For Q4 2025, targeting FX-neutral year-over-year subscription revenue growth of 5% to 10%, implying $65.8 million to $68.8 million. Targeting non-GAAP income from operations margin in the mid-20s and free cash flow margin in the high teens range. - For full year 2025, targeting FX-neutral year-over-year subscription revenue growth of 9.3% to 10.7%, implying a range of $234 million to $237 million based on October's average FX rates.

• Latin America environment remains cautious with longer decision cycles and slower top-of-funnel activities. High interest rates in Brazil lower consumer spending and weight on activity. - Argentina faced additional challenges in Q3 with weak consumer sentiment and no signs of short-term recovery, macroeconomic environment extremely challenging with high interest rates and paralyzed credit systems.

Q: I wanted to explore a bit the sequential increase in R&D expenditures. At the same time, I think the number of employees declined around 49 employees. So just wanted to get a bit more color on what you're doing, if you hire more people or not and why did employees decline? Just want to connect these 2 things. And the second thing -- second question is, could you discuss qualitatively how your churn is trending? Has the weakness in the market -- in the LatAm market also reflected in a somewhat higher client disconnection? Or is it more linked to GMV and maybe a longer cycle to close new deals?

A: Geraldo do Carmo Thomaz: We are continuing to invest heavily in R&D because we see this as a powerful moment for the company, for the whole world actually, one where technology and especially AI is redefining the entire commerce landscape. Our R&D focus is about building the next generation of VTEX, one that is AI native, outcome-driven and ready to power the future of global commerce. On the churn, the churn is stable. It's not -- what we're seeing is less momentum in sales.

Q: The first one is related to Argentina. Now that the elections are behind us and you're seeing more signs of macro stabilization, does this change anything on your outlook for the region? Can you comment briefly on how you perceive things evolving there, please? And the second question, more structural and qualitative one. If you could please develop on how you see AI investments leveraging the way you monetize your clients going forward?

A: Mariano Gomide de Faria: Argentina continues to be a tough market, the toughest we operate in. The macroeconomic environment remains extremely challenging with a very high interest rates. close to 50% nominal against a roughly 25% inflation. So it's a pretty tough environment. Geraldo do Carmo Thomaz: AI for us is not just a technology or monetization tool, but it's like a once in a-decade transformation. Similar to the move to the cloud more than 10 years ago. Back then, rebuilding our platform natively for the cloud allow us to leapfrog incumbents and become the e-commerce leader in Latin America. Today, we're approaching AI with the same urgency, ambition and clarity.