Vtex Q4 FY2021 Earnings Call

Hello everyone, and welcome to the VTEX Earnings Conference Call for the Quarter Ended December 31, 2021. I'm Julia Vater Fernández, Investor Relations Director for VTEX. Our senior executives presenting today are Geraldo Thomaz Júnior, Founder and Co-CEO; and Ricardo Camatta Sodré, Finance Executive Officer. Additionally, André 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 related to such matters as continued growth prospects for the company, industry trends and product and technology initiatives. These statements are based on current available information and our current assumptions, expectations and projections about future events. While we believe that our assumptions, expectations and projections are reasonable in view of the current 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 Statements Regarding Forward-Looking Statements section of VTEX's registration statement on Form F-1/A and other VTEX's filings with 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 our fourth 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 for our 2021 fourth quarter earnings results. 2021 was a very special year for VTEX. We went public. We added more large enterprise customers than ever before. We launched a conversational commerce support, social and live commerce. We partnered with outstanding companies such as AWS, Facebook, Stripe, Mercado Libre and many new system integrators, and continued consistently executing our geographical expansion plans among many other things. I'm proud to announce that in 2021 we made significant progress across the globe, which increases our confidence today more than ever on the potential of our global expansion. Now let me move to the progress we've made during the last quarter of 2021. We continued seeing strong momentum in the new contract signatures, resulting in a quarter-over-quarter increase in our backlog of new online stores under implementation in addition to the strong performance of the stores coming out of implementation and going live. More importantly, we increased the amount of large enterprise customer contracts signed that are now under implementation. This demonstrates the brand power VTEX gained over this year, giving us confidence in the future growth of the company and visibility of future performance. In the fourth quarter of 2021, we had more than 40% additional go-lives than last year in the same quarter, with customers now operating with us in LatAm, U.S. and Europe. We continued seeing a huge opportunity ahead of us. We still see half of our new customers joining VTEX, as greenfield e-commerce operations. E-commerce penetration still has a long road ahead, especially in Latin America. Some new customers that went live this quarter that didn't have online presence in the region before were Elefant in Eastern Europe, H&M and Mango in five countries in Latin America. We also added customers that migrated from in-house solutions or other competitive platforms, including Cencosud in three countries in Latin America, Whirlpool in Western Europe and CAE in the U.S. Speed to market continues to be a key differentiator and one of our competitive advantages against born-on-premises software. This is crucial as it enables our customers to initiate the digital commerce transformation faster, remaining relevant for the customers and improving their time to revenue. For example, this quarter H&M in Chile went live in less than four months. We are proud of our customers' journeys. In 2021, we were trusted by more than 2,400 customers with more than 3,200 stores across 38 countries. In our history as a company, we have built successful long-term relationships with our customers, expressed by an increased number of stores per customer and of countries where they operate with us. In 2021, when analyzing our top 100 customers, we reached 4.8 stores per customer with operations across 34 countries, up from 2020's 3.7 stores per customer in 26 countries. In Q4, some of our existing customers that expanded their operations with us by opening new online stores in new countries were AB InBev in the U.S., Motorola in Guatemala, Pandora in Colombia, Asics in Mexico, Victoria's Secret in Uruguay, and Tommy Hilfiger in Guatemala and Peru. Our existing customers continued growing at a healthy pace on top of the impressive growth they experienced in 2020. In 2021, our same-store sales were up 12% on an FX neutral basis, after 2020's same-store sales growth of 90%. Both same-store sales growth were impacted by COVID. 2020 numbers were positively impacted, as our customers could only sell their products online during a significant portion of the year, while 2021 numbers were impacted by the reopening of physical channels, which enabled omni-channel strategy in many cases supported by VTEX that partly offloaded some of the online sales of the prior year. With that said, it is important to note that in 2019 our same-store sales exceeded 25% in an FX neutral basis. Before moving to our product development and enhancement, I want to do a quick comment on a relevant special day we had this quarter, Black Friday. VTEX enabled 1.4 million consumer orders globally, which represents a 25% year-over-year increase in the number of orders compared to November 2020, demonstrating the long-term trend of consumers shopping online more frequently and the increasing penetration of digital commerce. And the two things we were most proud of this holiday season were the reliability of our network, which allowed us to reach 100% availability during the Black Friday week; and the increase in volumes in countries such as Mexico and Italy each joining the top five countries with the most GMV dollar increases of all VTEX countries, demonstrating how our efforts to grow those regions are tangible in volume and top line acceleration. Now moving to our product. I'm excited to update you with many inroads we made this quarter. I would like to introduce a new principle that will guide our development: commerce on autopilot and co-pilot, which basically means that we will develop products and features to help our platform to execute our customers' strategy autonomously and to recommend the best actions for them to grow with no or limited human interaction. Building is always an evolving process. We are encouraged to disrupt together with our customers the mainstream concepts of retail and e-commerce. We are always seeking to provide a future-proof solution that is way ahead of today's needs. So now going into our four product development pillars. In zero friction on-boarding and collaboration, we continued making progress with our new front-end framework called FastStore, which is already adopted by live large enterprise customers, such as Carrefour in Brazil and we have more in the pipeline such as Decathlon, Avon and Grupo Exito. We have already successfully mentored SIs that are now implementing this new module for VTEX IO that was built from scratch with storefront performance in mind without compromising flexibility or development productivity. We continued adding sellers to our seller onboarding solution that are actively using our new seller portal. We have companies such as Doto, MontenBaik, Elefant, GM Heritage and Samsung that already adopted the solution. As we are building the infrastructure to enable brands to be relevant in such a convenience-driven environment, we are always seeking to enhance the consumers' journey and offer omni-channel solutions that integrate our sales and fulfillment channels. Shoppers can now navigate in our customers' website and check for the local availability of each product relying on faster delivery SLA if the product is available in a nearby physical store or franchisee. We already have Carrefour, Empório da Cerveja and C&A among others benefiting from this new capability. We also continued making strides related to our inStore endless aisle approach. Our physical store sales associates can use filters such as price range, department and brand, among other configurable filters, when searching for products on inStore VTEX Intelligent Search. This results in a more dynamic and precise process, speeding up sales, allowing them to quickly find the desired products. Regarding becoming the single control panel for every order, we made three major launches: live shopping, conversational commerce and social commerce. In such a highly connected world, customers are becoming increasingly impatient and demanding when it comes to the shipping and support experience. The e-commerce revolution in retail might have been just the beginning of a complete change in the way we shop, which is crucial to be prepared for this next wave. VTEX Live Shopping app is now available to our customers. Our native live stream app helps brands and retailers using VTEX Commerce Platform to create one-to-many and one-to-one immersive live shopping experiences that increase engagement and conversion rate, unlocking new growth opportunities by simplifying how to start, plan, manage and track performance of live shopping events. With Live Shopping, our customers have the possibility to broadcast live and sell at the same time either from store, warehouse or the place of their preference. Product detail is explained at a deeper level and the shopping experience is amplified, helping consumers in their decision-making process. Early adopters of VTEX Live Shopping indicated an increase of about five times the average online session time, and most importantly an increase of more than 30% in purchase conversion during live events. We are consistently increasing the support of our customers who want to introduce sales capability to their conversational touch points. Several customers at VTEX have already combined the worlds of commerce and conversational platforms. We are onboarding customers from different segments, such as grocery and drug stores, to enable them to sell through WhatsApp and other conversational interfaces, a significant emerging channel that will complement physical stores, browsers, mobile apps, market place and other sales channels. We also launched VTEX Tracking notification via WhatsApp in addition to SMS and email notifications, increasing reviews response rates of our customers. We also launched social commerce capabilities, enabling sales associates in physical stores of our clients to share products with customers via QR codes. This allows physical store customers to access a link to a shopping cart with products so they can complete the purchase even if size or color is not available in the physical store. On our mission of becoming the developer platform of choice for commerce, we continue attracting developers to our low-code platform, gaining momentum in the community and scaling our capabilities. Most active developers accessing VTEX development portal increased to more than 20,000 in Q4 from more than 14,000 in Q3. Additionally, we are excited to announce that this quarter U.S. developers accessing our portal have more than doubled quarter-over-quarter. Finally, regarding providing e-commerce on autopilot and co-pilot, we launched our new admin dashboard with near real-time data with the most relevant commerce information. Also with our new VTEX Log performance panel, customers can have a graphical presentation and description of each carrier's performance with algorithms suggesting which one is more efficient for each particular delivery. Our clients can track carrier performance calculation results and leverage all the detailed information we have on each carrier for a specific route. Last but not least, I would like to thank our more than 1,700 VTEXers that have made VTEX into the top 10 public software companies to work at according to Glassdoor. In the last 18 months, we tripled our investments, increasing significantly our headcount from around 600 in 2019. So for us, being able to maintain our core DNA at scale, while evolving into becoming a better, stronger and high-performing company is an honor and a commitment we make every day to all VTEXers. We have been able to build a robust team in every area: G&A, R&D and S&M. And now, it's time to let this team mature, reach efficiencies and show the world what we are capable of. In 2022, we expect to grow our team at a more measured pace. By reaping the benefits of the investments made in 2021, we will grow at a strong pace in 2022, while at the same time delivering significant operating margin expansion. Now before I turn the call to Ricardo, I would like to announce that we will be hosting the VTEX Day, the biggest e-commerce event in Latin America and the third globally on April 12 and 13 in Sao Paulo. I would like to invite you to come experience VTEX's culture and see the power of our ecosystem in this magnificent event. In 2019, the last year we could do this in person, we had more than 20,000 attendees and more than 160 amazing speakers. We are confident we will have another amazing event this year. Being mindful of social distancing and health safety, the event will be limited in terms of attendees. So, book your place quickly and stay tuned. We will be more than happy to have you all with us.

Thank you, Geraldo. Hi, everyone. It's a pleasure to be here updating you on our financial performance for the fourth quarter of 2021. This quarter our revenue increased to $37.1 million, a year-over-year increase of 30% on an FX neutral basis, surpassing the implied 27% year-over-year FX neutral growth rate we guided last quarter and demonstrating that we are indeed entering into the growth rate normalization trend we were expecting towards 2022. This allows us to reach a revenue of $125.8 million for the full year 2021, representing also a 30% growth on an FX neutral basis on top of our record revenue growth of 95% on an FX neutral basis last year. Our robust performance in such a tough comps environment gives us confidence in our future growth projections going forward. In the fourth quarter, we've seen some verticals gaining relevance, such as beauty and health, grocery, and apparel and accessories, which grew 42.3%, 36.6%, and 33.8%, respectively, on a year-over-year and FX neutral basis. Some verticals, such as electronics and home appliances, on the other hand, were impacted by supply chain challenges and macroeconomic trends and presented more modest performance. That shows that VTEX has a resilient business model. Our software works well for many different industries, allowing us to perform well even while some verticals are impacted by macro events. Our revenue from existing stores increased to $87.3 million in 2021, representing a net revenue retention of 105.1% on an FX neutral basis. Our 2020 net revenue retention of 171.9% was positively impacted by physical stores temporarily closing. In contrast, our 2021 NRR was impacted by physical stores reopening. On a two-year compounded average, our 2020-2021 net revenue retention was 134.4%, still above our historical average NRR rates between 110% and 115%. On top of our existing stores growth, we continue attracting new stores, adding $19.4 million in revenue to our base, which represented 23% of our 2020 VTEX platform revenue demonstrating the strong momentum we are having in new contract signatures. The number of customers with revenue above $250,000 per year reached 76 from 58 in 2020, representing a year-over-year increase of 31%. Our geographical expansion continues to broaden, with revenues outside of Brazil already representing 47% of our total revenues. In a two-year CAGR, Latin America excluding Brazil grew 84%, while the Rest of the World grew at almost triple digits at 96%. When analyzing our FX-neutral year-over-year growth in 2021, Brazil grew 24%; Latin America excluding Brazil, our region most impacted by physical stores reopening, increased by 28%; and Rest of the World grew 98%, positively impacted by the Workarea acquisition, but also driven by solid organic growth. Now moving down our P&L. Non-GAAP subscription gross profit was $24.1 million in the fourth quarter of 2021, compared to $17.9 million in the fourth quarter of 2020, representing a year-over-year increase of 35% in U.S. dollars and 38.2% on an FX neutral basis. Non-GAAP subscription gross margin was 69.9% in the fourth quarter of 2021, compared to 64.6% in the same quarter of 2020. Non-GAAP subscription gross margin year-over-year 530 basis point improvement reflects operational hosting cost efficiencies. We believe we will continue improving subscription gross margin in 2022 and onwards, even if specific quarters could potentially show some volatility, while we introduce new product features and migrate non-core software providers potentially incurring additional short-term costs in order to enjoy long-term higher efficiency. We decided to significantly increase our investments 18 months ago to capture the strong e-commerce acceleration market opportunity. As a result, our non-GAAP loss from operations was $10.9 million during the fourth quarter of 2021, compared to non-GAAP income from operations of $0.1 million in the fourth quarter of 2020, primarily due to incremental personnel-related investments. The non-GAAP loss from operations margin this quarter already improved versus Q3, a result of Q4 seasonality as well as operational leverage after a more moderate quarter-over-quarter expense increase. Also, along this line, we are encouraged to announce that we continue having attractive unit economics during Q4, despite the higher investments we conducted in new geographies. Our LTV to CAC is still above six times cash on cash. During 2021, we planted the seeds across new geographies and product features. Now it's time to see which ones will be most accretive to VTEX and focus our efforts on those to leverage our future growth. As of the three months ended December 31, 2021, VTEX had a negative $21.3 million free cash flow, primarily driven by our non-GAAP loss from operations and one-off working capital impacts. Here, it's important to note that until the end of 2020, VTEX grew without relevant capital injection, self-funded by its powerful business model. Although in the last three years, we had relevant private investment rounds, most of those rounds were secondary. Out of them, we only received $66.3 million of primary funding. We consider it's important to note that by the end of 2020, we had $75.5 million in cash and marketable securities on the balance sheet. We ended the year with almost $300 million in cash, so we are more than well positioned to deliver strong results with no additional foreseeable funding needs for our organic growth plans. Before moving to our 2022 outlook, I would like to remind the audience that from a business perspective, we think about our P&L as a combination of two P&Ls: our existing stores' P&L and our new stores' P&L. You'll find this reference in Slide 28 of our fourth quarter earnings presentation. VTEX existing stores' revenue, excluding our SMB platform, represented approximately 80% of total revenues. This P&L has an attractive operating margin and grows at our net revenue retention rate. We don't have any significant sales and marketing expenses to serve our existing stores. We only have support costs, which we already included in our subscription cost. These existing stores' P&L grows with our net revenue retention, which is mainly driven by the same-store sales growth of our existing stores, our variable revenue as a percentage of our total revenue and our annual revenue churn. Our new stores' revenue, also excluding our SMB platform, represented approximately 20% of total revenues. This P&L has a negative operating margin, but brings new stores to our base with attractive unit economics. Targeting new stores is a key focus of our sales and marketing team, so this P&L includes almost all those expenses. Now comparing our P&L breakdown for 2020 and 2021. There are a couple of comments I'd like to make. We are exiting the year at a subscription gross margin of 70%, so even higher than the overall gross margin for 2020. On the other hand, in the new stores' P&L, the 35% gross margin in 2021 is simply a result of a higher mix of new stores in the overall base and the additional services these new stores require to go live. When analyzing the expenses, it is important to note that we estimate that in 2021, 25% of our expenses were related to our global expansion outside of Latin America. More precisely 35% of our S&M, 15% of our R&D, and 10% of our G&A expenses. Therefore, the increase in sales and marketing in new stores' P&L is mostly explained by our global expansion. The increase in R&D is explained by our global expansion and our investments in new products and capabilities that may drive additional future growth. And the increase in G&A is mostly explained by our investments to become a public company, which is already reducing as a percentage of revenue over the last four quarters. Now moving to our outlook. We expect to continue seeing strong new stores growth as our encouraging backlog undergoes implementation. In Q1, our existing stores will face tougher comps than the ones in Q4, as many countries in LatAm experienced a second wave of COVID during the first quarter of 2021. Nevertheless, we expect our revenue growth to continue at a strong pace. With that said, we are targeting revenue in the $33.0 million to $33.5 million range for the first quarter of 2022, implying a 30% year-over-year FX neutral growth rates in the middle of the range. For the full year 2022, we expect FX neutral revenue growth of 29% to 31%, implying a range of $158 million to $162 million as of fourth quarter end-of-period FX rates. Wrapping up today's call, we want to reinforce that VTEX as the leading digital commerce platform in Latin America, the fastest-growing region for e-commerce in the world and yet overwhelmingly underpenetrated, is better positioned than ever to continue delivering strong results. On top of that, we are also only scratching the surface of our global opportunity. We have an exciting road ahead of us, and we are encouraged to conquer this journey with our employees, customers, partners and investors by our side. Thanks everyone for joining this conference call. We look forward to keeping you updated on our progress next quarter. With that, let's open it up for questions now.

Thank you. Our first question today comes from Clarke Jeffries from Piper Sandler. Please go ahead. Your line is now open.

Hello. Thank you for taking my question. First, I would like to understand your hiring plans for 2022, especially considering the significant investment involved. Your headcount has increased from about 850 five quarters ago to over 1,700 now. How is hiring progressing for 2022? Specifically, how should we consider the margin profile in relation to the investments made in the Rest of the World? I also have a follow-up question.

Thank you for the question. Since the start of the pandemic in 2020, we significantly accelerated hiring across various departments, including R&D, sales and marketing, and general and administrative functions. This was a crucial period for us, as we began attracting top talent and expanding our team considerably. After our IPO, we continued to hire extensively. The employer brand associated with the IPO played a vital role in helping us find key personnel we had been missing prior to it. I believe we have tripled our workforce since 2019, though I may need correction on this from Sodré or André. For this year, I mentioned that we are not hiring anyone new, but we anticipate that our revenue will exceed our expenses, leading to positive margins next year. Our current focus is to nurture our large and capable team, identify any remaining key roles needed, and strategically use our investments to drive revenue growth in the coming years.

Great. That's very helpful. Go ahead.

Yes. On your second question, I think you had a question about the margins and globally. So, as you probably heard in the prepared remarks, we are estimating that 25% of our expenses comes from our global expansion. And we have roughly 9% of our revenue coming from the Rest of the World, right? So from that you can have a sense of how much we are investing. And we tend to think more about our P&L by breaking between the existing customers and the new customers as highlighted in the prepared remarks than by geography at this point. Hopefully that's helpful.

Yes. Yes. That certainly makes sense. I think a follow-up question is encouraging to hear about the number of go-lives, the backlog of contracts that are moving to implementation. I wanted to get an update on how you've seen the conversations change, especially as some of these brands start to weigh incremental investments maybe in the context of physical channels coming back and how they're weighing your e-commerce strategy versus physical channels. Has omni-channel or hybrid kind of elevated into the top of those conversations? And where are you seeing the appetite to invest as we enter 2022?

We are very enthusiastic about enhancing the physical store experience through digitalization. Our goal is to integrate the physical store into the digital retail landscape, and we have several initiatives underway to achieve this. We are creating an inStore solution, which is a software tool designed for salespeople in physical stores. Many of our customers at VTEX are already fulfilling in-store orders placed on their e-commerce websites. This inStore solution facilitates infinite aisle purchases, allowing customers to buy products that are not available in the physical store or even from the brand itself. Consequently, salespeople in physical stores can also sell third-party products from the marketplace. Additionally, we are working on a picking solution that enables in-store salespeople to fulfill orders generated elsewhere and deliver them to nearby customers. This capability allows for quick and accurate delivery estimates to consumers. With our support for conversational commerce initiatives, we aim to significantly enhance the role of physical store salespeople, enabling them to assist customers anytime and anywhere, not just those physically present in the store.

Great. I appreciate the color. Thank you.

Thank you. Our next question today comes from Josh Beck from KeyBanc. Please go ahead. The line is yours.

Thank you, team, for the call and the question. I wanted to ask about this Live Shopping feature. It certainly seems like it's improved engagement. It's improved conversion. Obviously, those are really important metrics for your customers. Just curious about where the uptake could maybe go over time. Is this something that you plan to monetize specifically, or is it just part of the platform? Would love to hear more on that topic.

Yes. We are seeing a big trend of the traffic moving from the browser to the conversational kind of suite. So social commerce with a personal shopper, live shopping all these suites of social engagement, we foresee as a big trend for all our clients. But these trends started in Asia. It's ramping up in Latin America strong as it was in Asia and we reached Europe and the United States. Live shopping is one of the elements of social commerce. We already have the VTEX Live Commerce in production. It is already in place in more than 50 clients. And yes, we will monetize the channel, as we do in other channels. So, where these live commerce will stand in Latin America, Europe or U.S., we believe that we can reach the same level that is in Asia right now. That social commerce entirely represents 50 or more percent of the entire GMV in Asia. So it is a big bet for VTEX. We are seeing good momentum on those clients and brands from luxury brands to discount brands, who are using this as a new channel. And the beauty of the new channel, it is that most organic channel live commerce. So it is a trend that will help the margin of our retailers and clients.

Very helpful. Please proceed.

Yes. And just to complement on the monetization side, we do charge a fee for using the Live Commerce app. However, as you know, we are very aligned with our customers, as we have this transaction fee, this take rate on their GMV. So if they increase the session time, if they increase their conversion, they will increase their GMV. And that will translate into additional revenue for VTEX as well. So, it's a very aligned business model with our customers.

That makes total sense. I have a follow-up question for you, Ricardo. I’m curious about GMV and net revenue retention. Do you anticipate this year being within more typical ranges, or are there other factors we should consider as we develop our model for the year?

Yes. No, thanks Josh for the question. So, GMV growth and revenue growth, right? I think if you look at the past couple of quarters, we saw revenue growth higher than GMV growth. And there are two mix impacts that explain what happened over the past quarters. And I can now link that to the expectation for the future. I think that's more of your question. But the first mix impact is the increase of new stores as a percentage of our total revenue, right? New stores come with a higher take rate as customers' GMV ramps up over time and our fixed fee remains the same and also new stores drive an increase in services needed for implementation and go-live of the store. The second mix impact is the increase in revenue coming from customers that have lower average ticket consumer purchases. We tend to have a slightly higher take rate for customers of VTEX with lower average ticket. And given the acceleration in the last two quarters of beauty and health, grocery and apparel and accessories, categories with lower average tickets, we experienced a positive contribution to our take rate. Now having said that for the full year 2022, we would expect that GMV and revenue growth to be more aligned on a quarter-for-quarter basis. There could be some mix fluctuations. For example, we currently have a strong backlog undergoing implementation. So for the next couple of quarters, GMV growth could lag revenue growth. But for the full year GMV and revenue growth should be more aligned. Hopefully that answers the question.

Super helpful. Thank you team.

Thank you. Our next question today comes from Fred Mendes from Bank of America. Please go ahead, Fred. The line is yours.

Hello. Good afternoon everyone. I have two questions as well. The first one about the developers. Very interesting information disclosed in here and the growth is quite relevant 20,000 this quarter from 14,000 last quarter. So the first question, how do you detect you have a new developer working in the platform? And accordingly, how do you get this information? And number two, if you did any kind of marketing campaign or non-recurring event that led to this very strong growth over the last two quarters pretty much. This would be the first one. And then the second one also on the same topic. Most of these developers this growth, are they coming from your clients who have developers working on your platform, or we are seeing a strong number of freelancers pretty much trying to develop a product and monetize them? Those will be the two questions. Thank you very much.

No. Great. It's Ricardo here. Happy to take this one. So, on detecting the developers on our development portal, right, I mean, we have a portal. They have to log in to that portal. So, we can see how many developers are logging in, and if they are deploying code to our platform, right? And that code could be a new application, could be an update to an app. It could be some type of customization that a customer is making on top of the VTEX platform, right? So all those interactions we see it because they have to log in to our portal, right? And we have the control. And we see if they are in Brazil, or if they are in the U.S. and so on and so forth in different geographies. So we can very quickly immediately track that type of information. And the other interesting information that we track that we have in the earnings presentation we did not mention in the earnings call is the number of deploy that they are doing because it's not just a matter of them logging into the portal. You have to see if they are actually doing something in the portal, right? So we also track that and that has also been increasing over the quarters. We released this over the past couple of quarters as well. So you can all see that trend. So that's how we track it. And your second question if you could repeat please.

I would like to acknowledge Mariano for his contributions. As we expand in the U.S. and Europe, we need to tailor our product to meet local needs. Over the past two years, we have invested significantly in how to integrate VTEX with local players. Currently, we have more than 100 ISVs, including Cybersource, Affirm, PayPal, ShipStation, Klarna, and Listrak, all integrated natively. This integration is essential for maintaining competitiveness in the U.S. and Europe, and it requires considerable development effort from our clients, partners, and VTEX itself. Our ecosystem is growing as we expand our presence. There is also an increased demand for developers to enhance our integrations with ERPs. We are integrated with ERPs and POS systems like SAP, NetSuite, Microsoft Dynamics, Retail Pro, and Lightspeed, which also require developers to create applications for our platform. Additionally, our system integrators in the United States, such as Publicis Sapient, Wunderman Thompson, Gorilla Group, Valtech, BORN Group, Pivotree, and Ogilvy, are involved in projects with VTEX that need their IT resources to be ready for VTEX. These three areas—ISVs, ERP integrations, and system integrators—are driving the demand for more developers to deliver code on VTEX IO.

Perfect. Super clear, Mariano. And then I guess going for the second question would be if these new developers that are attracted to your platform if you can track if they are basically developers from your clients, right, who are working on their own projects or developing their products or they are basically freelancers that through the community, they see your platform as a way to develop an app or something and monetize on it. Thank you.

Yes. The majority of the developers are from SIs or ISVs. So we see very few freelancers starting new companies through VTEX. And what we are seeing is a massive adoption of ISVs and SIs where we have our expansion. So, those added developers come from those new expansion markets.

Thank you. Our next question today comes from Vitor Tomita from Goldman Sachs. Please go ahead. The line is yours.

Hello. Good evening all, and thanks for taking our question. So, two questions as well from our side. The first one is thinking so far in 2022, we've seen some wider macro issues that have likely affected the business in different ways. So there's the Omicron spike recently further economic reopening, some macroeconomic volatility, still some supply chain issues. Thinking about the 2022 guidance, what kind of scenario are you assuming for the impact of this type of variables? That would be our first question. And our second question, if we may would be, following up on your discussion of expanding features, R&D omni-channel. Could you give us an update on your M&A strategy and on whether you are seeing any potential opportunities to complement your platform via acquisitions to further accelerate that rollout of new features? Thank you.

Hi Vitor, thank you for the question. Regarding the macroeconomic landscape, we cannot control it and it is difficult to predict future developments. As you pointed out, there are supply chain challenges, the Omicron variant, and upcoming elections in various Latin American countries this year, all of which are beyond our control. What we can manage is how we assist our customers in increasing sales, enhancing their performance, improving their GMV, implementing omni-channel solutions, integrating physical stores with e-commerce through our OMS, launching marketplaces, and supporting their digital transformation journeys. From our perspective, looking back at 2021, a year with challenging comparisons to 2020 due to the lockdowns, we achieved a 30% year-over-year growth. We are optimistic about achieving another 30% growth in 2022. Although this year may not be straightforward due to current events, we are confident in reaching that growth target, which is within our guidance for the year. We have forecasted FX neutral growth between 29% and 31% for 2022, and we are comfortable with that. In response to your second question regarding M&A, we have $300 million on our balance sheet, which we are comfortable utilizing to support our organic growth plans. Historically, VTEX has engaged in 15 acquisitions, including about seven in the last three years, primarily focused on bolt-on transactions rather than transformational ones. We have an M&A team actively evaluating opportunities, focusing on three main verticals and one horizontal area. The first vertical involves acquiring customer bases and migrating those customers to VTEX, like we did with the Workarea acquisition in the U.S. The second vertical centers on acquiring features that help our customers increase sales, reduce churn, or improve their NPS; for instance, we acquired Biggy, a search engine to aid in sales. The third vertical looks at entering ambitious end markets where we believe we have a competitive advantage. The horizontal aspect pertains to hiring; finding companies with strong development and R&D teams could be a viable acquisition target for us. We are actively monitoring opportunities in this area and currently have no announcements to make, but we are equipped with cash, a dedicated team, and past experience in M&A. Future activities will likely focus more on smaller, incremental acquisitions rather than transformational ones.

Very clear. Thank you very much.

Thank you. So now Geraldo would like to say some final remarks. Please go ahead.

I want to take this opportunity to thank you for being here with us. We closed 2021 showing solid steps toward our desirable future, and we are excited for what's to come. We will continue to focus on executing with excellence and making VTEX the platform of choice for enterprise brands and retailers not only in Latin America but worldwide. We invite you to join us in our journey of disrupting commerce. Looking forward to keeping you updated on our progress next quarter. Stay safe. Thank you very much.

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