6-K
Vtex (VTEX)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 UNDER
THE SECURITIES EXCHANGE ACT OF 1934
For the month of November 2023.
Commission File Number 001-40626
VTEX
(Exact name of registrant as specified in its charter)
N/A
(Translation of registrant’s name into English)
125 Kingsway, WC2B 6NH
London, United Kingdom
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.
Form 20-F ☒ Form 40-F ☐
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ☐
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ☐
Table of Contents
| PART I - FINANCIAL INFORMATION | 3 |
|---|---|
| Item 1 - Financial Statements | 3 |
| --- | --- |
| Condensed consolidated interim balance sheets | 4 |
| --- | --- |
| Condensed consolidated interim statements of profit or loss | 6 |
| --- | --- |
| Condensed consolidated interim statements of changes in shareholder’s equity | 7 |
| --- | --- |
| Condensed consolidated interim statements of cash flows | 8 |
| --- | --- |
| Notes to condensed consolidated interim financial statements | 9 |
| --- | --- |
| Item 2 - Management’s discussion and analysis of financial condition and results of operations | 30 |
| --- | --- |
| PART II - OTHER INFORMATION | 42 |
| --- | --- |
| Item 1 - Signatures | 42 |
| --- | --- |
2
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Index to Financial Statements
VTEX
Condensed consolidated interim financial statements
Condensed consolidated interim balance sheets
Condensed consolidated interim statements of profit or loss
Condensed consolidated interim statements of changes in shareholder’s equity
Condensed consolidated interim statements of cash flows
Notes to the condensed consolidated interim financial statements
3
VTEX
Condensed consolidated interim balance sheets
(Unaudited)
In thousands of U.S. dollars, unless otherwise indicated
| September 30, 2023 | December 31, 2022 | |
|---|---|---|
| ASSETS | ||
| Current assets | ||
| Cash and cash equivalents | 21,301 | 24,394 |
| Restricted cash | - | 1,608 |
| Short-term investments | 192,405 | 214,164 |
| Trade receivables | 41,591 | 36,844 |
| Recoverable taxes | 3,762 | 5,122 |
| Deferred commissions | 937 | 663 |
| Prepaid expenses | 4,291 | 4,152 |
| Derivative financial instruments | 287 | 117 |
| Other current assets | 60 | 93 |
| Total current assets | 264,634 | 287,157 |
| Non-current assets | ||
| Trade receivables | 5,920 | 5,432 |
| Deferred tax assets | 20,731 | 17,710 |
| Prepaid expenses | 105 | 204 |
| Recoverable taxes | 4,174 | 3,334 |
| Deferred commissions | 2,769 | 1,790 |
| Other non-current assets | 947 | 957 |
| Right-of-use assets | 3,658 | 4,818 |
| Property and equipment, net | 3,127 | 3,909 |
| Intangible assets, net | 30,173 | 31,210 |
| Investments in joint venture | 1,061 | 1,152 |
| Total non-current assets | 72,665 | 70,516 |
| Total assets | 337,299 | 357,673 |
The above condensed consolidated interim balance sheets should be read in conjunction with the accompanying notes.
4
VTEX
Condensed consolidated interim balance sheets
(Unaudited)
In thousands of U.S. dollars, unless otherwise indicated
| September 30, 2023 | December 31, 2022 | |
|---|---|---|
| LIABILITIES | ||
| Current liabilities | ||
| Accounts payable and accrued expenses | 36,549 | 34,136 |
| Loans and financing | - | 1,153 |
| Taxes payable | 4,124 | 4,128 |
| Lease liabilities | 1,897 | 1,898 |
| Deferred revenue | 24,366 | 20,332 |
| Accounts payable from acquisition of subsidiaries | - | 299 |
| Other current liabilities | 296 | 70 |
| Total current liabilities | 67,232 | 62,016 |
| Non-current liabilities | ||
| Accounts payable and accrued expenses | 1,092 | 511 |
| Taxes payable | - | 160 |
| Lease liabilities | 2,817 | 3,737 |
| Deferred revenue | 16,354 | 13,923 |
| Deferred tax liabilities | 3,078 | 2,464 |
| Other non-current liabilities | 464 | 185 |
| Total non-current liabilities | 23,805 | 20,980 |
| EQUITY | ||
| Issued capital | 19 | 19 |
| Capital reserve | 377,330 | 390,885 |
| Other reserves | 2,142 | 127 |
| Accumulated losses | (133,286) | (116,373) |
| Equity attributable to VTEX’s shareholders | 246,205 | 274,658 |
| Non-controlling interests | 57 | 19 |
| Total shareholders’ equity | 246,262 | 274,677 |
| Total liabilities and equity | 337,299 | 357,673 |
The above condensed consolidated interim balance sheets should be read in conjunction with the accompanying notes.
5
VTEX
Condensed consolidated interim statements of profit or loss
(Unaudited)
In thousands of U.S. dollars, unless otherwise indicated
| Three months ended | Nine months ended | |||
|---|---|---|---|---|
| September<br><br> <br>30, 2023 | September<br><br> <br>30, 2022 | September<br><br> <br>30, 2023 | September<br><br> <br>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 | (11,395) | (9,755) | (32,948) | (29,917) |
| Services cost | (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 | (8,374) | (6,944) | (24,541) | (21,296) |
| Sales and marketing | (15,101) | (16,176) | (44,332) | (55,394) |
| Research and development | (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 income | 8,974 | 7,137 | 25,573 | 16,125 |
| Financial expense | (7,896) | (7,327) | (22,925) | (26,462) |
| 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) |
| Income tax | ||||
| Current | (50) | 260 | (2,317) | (741) |
| Deferred | (214) | (590) | 2,068 | 5,115 |
| Total income tax | (264) | (330) | (249) | 4,374 |
| Net loss for the period | (2,379) | (11,542) | (16,917) | (52,097) |
| Attributable to controlling shareholders | (2,374) | (11,542) | (16,913) | (52,095) |
| Non-controlling interest | (5) | - | (4) | (2) |
| Loss per share | ||||
| Basic loss per share | (0.013) | (0.060) | (0.090) | (0.273) |
| Diluted loss per share | (0.013) | (0.060) | (0.090) | (0.273) |
The above condensed consolidated interim statements of profit or loss should be read in conjunction with the accompanying notes
6
VTEX
Condensed consolidated interim statements of changes in shareholders’ equity
(Unaudited)
In thousands of U.S. dollars, unless otherwise indicated
| Issued capital | Capital reserve | Other reserves | Accumulated<br><br> <br>losses | Equity<br><br> <br>attributable to<br><br> <br>VTEX’s<br><br> <br>shareholders | Non-<br><br> <br>controlling<br><br> <br>interests | Total<br><br> <br>shareholders’<br><br> <br>equity | |
|---|---|---|---|---|---|---|---|
| At January 1, 2022 | 19 | 390,466 | 652 | (63,955) | 327,182 | 7 | 327,189 |
| Net loss for the period | - | - | - | (52,095) | (52,095) | (2) | (52,097) |
| Other comprehensive income (loss) | - | - | (1,693) | - | (1,693) | - | (1,693) |
| Total comprehensive income for the period | - | - | (1,693) | (52,095) | (53,788) | (2) | (53,790) |
| Transactions with owners of the Company | |||||||
| Exercise of stock options | - | 430 | - | - | 430 | - | 430 |
| Issue of ordinary shares as consideration for a business combination | - | 3 | - | - | 3 | - | 3 |
| Share repurchase program | - | (5,184) | - | - | (5,184) | - | (5,184) |
| Share-based compensation | - | 8,947 | - | - | 8,947 | - | 8,947 |
| Transactions with non-controlling interests | - | - | - | - | - | 7 | 7 |
| Total transactions with owners of the Company | - | 4,196 | - | - | 4,196 | 7 | 4,203 |
| At September 30, 2022 | 19 | 394,662 | (1,041) | (116,050) | 277,590 | 12 | 277,602 |
| At January 1, 2023 | 19 | 390,885 | 127 | (116,373) | 274,658 | 19 | 274,677 |
| Net loss for the period | - | - | - | (16,913) | (16,913) | (4) | (16,917) |
| Other comprehensive income (loss) | - | - | 2,015 | - | 2,015 | - | 2,015 |
| Total comprehensive income for the period | - | - | 2,015 | (16,913) | (14,898) | (4) | (14,902) |
| Transactions with owners of the Company | |||||||
| Exercise of stock options | - | 632 | - | - | 632 | - | 632 |
| Share repurchase program | - | (25,053) | - | - | (25,053) | - | (25,053) |
| Share-based compensation | - | 10,866 | - | - | 10,866 | - | 10,866 |
| Transactions with non-controlling interests | - | - | - | - | - | 42 | 42 |
| Total transactions with owners of the Company | - | (13,555) | - | - | (13,555) | 42 | (13,513) |
| At September 30, 2023 | 19 | 377,330 | 2,142 | (133,286) | 246,205 | 57 | 246,262 |
The above condensed consolidated interim statements of changes in shareholders’ equity should be read in conjunction with the accompanying notes
7
VTEX
Condensed consolidated interim statements of cash flows
(Unaudited)
In thousands of U.S. dollars, unless otherwise indicated
| September 30, 2023 | September 30, 2022 | |
|---|---|---|
| Net loss for the period | (16,917) | (52,097) |
| Adjustments for: | ||
| Depreciation and amortization | 3,799 | 3,378 |
| Deferred income tax | (2,068) | (5,115) |
| Loss on disposal of rights of use, property, equipment, and intangible assets | 614 | (9) |
| Expected credit losses from trade receivables | 1,093 | 640 |
| Share-based compensation | 12,280 | 8,501 |
| Provision for payroll taxes (share-based compensation) | 2,117 | (1,578) |
| Adjustment of hyperinflation | 10,221 | 3,786 |
| Equity results | (989) | (759) |
| Accrued interest | (9,875) | (597) |
| Fair value (gains) losses | (7,863) | 6,610 |
| Others and foreign exchange, net | 2,559 | 464 |
| Change in operating assets and liabilities | ||
| Trade receivables | (6,781) | (604) |
| Recoverable taxes | (108) | 927 |
| Prepaid expenses | 206 | 3,919 |
| Other assets | (25) | (581) |
| Accounts payable and accrued expenses | (958) | 3,184 |
| Taxes payable | 415 | (2,523) |
| Deferred revenue | 5,450 | 48 |
| Other liabilities | 1,175 | 791 |
| Cash used in operating activities | (5,655) | (31,615) |
| Income tax refund (paid) | 233 | (193) |
| Net cash used in operating activities | (5,422) | (31,808) |
| Cash flows from investing activities | ||
| Dividends received from joint venture | 1,138 | 147 |
| Purchase of short-term investment | (112,350) | (111,040) |
| Redemption of short-term investment | 139,458 | 66,152 |
| Interest and dividend received from short-term investments | 1,941 | 597 |
| Payment of business acquired | - | (1,692) |
| Acquisitions of property and equipment | (252) | (266) |
| Derivative financial instruments | 359 | - |
| Net cash provided by (used in) investing activities | 30,294 | (46,102) |
| Cash flows from financing activities | ||
| Derivative financial instruments | - | (718) |
| Changes in restricted cash | 1,660 | (403) |
| Proceeds from the exercise of stock options | 632 | 430 |
| Net-settlement of share-based payment | (1,618) | (1,138) |
| Buyback of shares | (25,053) | (5,184) |
| Payment of loans and financing | (1,238) | (1,982) |
| Interest paid | (5) | (48) |
| Principal elements of lease payments | (1,152) | (898) |
| Lease interest paid | (440) | (515) |
| Net cash used in financing activities | (27,214) | (10,456) |
| Net decrease in cash and cash equivalents | (2,342) | (88,366) |
| Cash and cash equivalents, beginning of the period | 24,394 | 121,006 |
| Effect of exchange rate changes | (751) | (2,783) |
| Cash and cash equivalents, end of the period | 21,301 | 29,857 |
| Non-cash transactions: | ||
| Lease liabilities arising from obtaining right-of-use assets | 85 | 985 |
| Issue of ordinary shares as consideration for a business combination | - | 3 |
| Dividends from joint venture used to pay accounts from acquisition of subsidiaries | - | 448 |
| Transactions with non-controlling interests | 42 | 7 |
The above condensed consolidated interim statements of cash flows should be read in conjunction with the accompanying notes.
8
VTEX
Notes to the condensed consolidated interim financial statements
(Unaudited)
In thousands of U.S. dollars, unless otherwise indicated
| 1 | General information<br><br> <br><br><br> <br>VTEX (“VTEX” or the “Company”) and its subsidiaries, or collectively referred to as the “Group”, provide a software-as-a-service digital commerce platform for<br> enterprise brands and retailers. VTEX’s services enable its customers to execute their commerce strategy, including building online stores, integrating and managing orders across channels, and creating marketplaces to sell products from<br> third-party vendors. The platform is also designed to be the operating system for the commerce ecosystem, enabling enterprise brands and retailers to orchestrate their network of consumers, business partners, suppliers, and fulfillment<br> providers in one place with a complete Commerce, Marketplace, and OMS solution. VTEX assists global companies build, manage, and deliver native and advanced business-to-business (B2B), business-to-consumer (B2C), and Marketplace<br> commerce experiences with competitive time-to-market. The Company's shares, under the symbol “VTEX”, are listed on the New York Stock Exchange (“NYSE”).<br><br> <br> <br><br><br> <br> <br>The following entities are part of the Group and are being consolidated in these unaudited condensed interim financial statements: | |||||
|---|---|---|---|---|---|---|
| Interest held by the Group (%) | ||||||
| --- | --- | --- | --- | --- | --- | --- |
| Company | Place of business/ country of incorporation | Relationship | Principal business activity | September 30,<br><br> <br>2023 | December 31,<br><br> <br>2022 | September 30,<br><br> <br>2022 |
| VTEX (“VTEX”) | Cayman | Holding | Technology Services | |||
| VTEX Argentina S.A. (“VTEX ARG”) | Argentina | Subsidiary | Technology Services | 100 | 100 | 100 |
| VTEX Brasil Tecnologia para E-commerce LTDA. (“VTEX Brazil”) | Brazil | Subsidiary | Technology Services | 100 | 100 | 100 |
| VTEX Day Eventos LTDA (“VTEX DAY”) | Brazil | Subsidiary | Production of events | 100 | 100 | 100 |
| Loja Integrada Tecnologia Para Softwares S.A. (“Loja Integrada”) | Brazil | Subsidiary | Technology Services | 98.86 | 99.58 | 99.73 |
| VTEX Chile SPA (“VTEX CHI”) | Chile | Subsidiary | Technology Services | 100 | 100 | 100 |
| VTEX Colombia Tecnologia para Ecommerce S.A.S. (“VTEX COL”) | Colombia | Subsidiary | Technology Services | 100 | 100 | 100 |
| VTEX Commerce Cloud Solutions LLC (“VTEX USA”) | USA | Subsidiary | Technology Services | 100 | 100 | 100 |
| VTEX Ecommerce Platform Limited (“VTEX UK”) | UK | Subsidiary | Technology Services | 100 | 100 | 100 |
| VTEX Mexico Soluciones en Ecommerce S.R.L. de C.V. (“VTEX MEX”) | Mexico | Subsidiary | Technology Services | 100 | 100 | 100 |
| EICOM Business School S.A.P.I De C.V. (“Escuela”) | Mexico | Subsidiary | Technology Services | 100 | 100 | 100 |
| Peru Tecnologia para ECOMMERCE S.A.C. (“VTEX PERU”) | Peru | Subsidiary | Technology Services | 100 | 100 | 100 |
| VTEX Platform España, S.L. ("VTEX ESP") | Spain | Subsidiary | Technology Services | 100 | 100 | 100 |
| VTEX Ecommerce Platform Limited - Sede Secondaria (“VTEX ITA”) | Italy | Branch | Technology Services | 100 | 100 | 100 |
| VTEX Ecommerce Platform Limited London - Sucursala Bucuresti (“VTEX ROM”) | Romania | Branch | Technology Services | 100 | 100 | 100 |
| VTEX Ecommerce Platform Limited – Sucursal em Portugal (“VTEX PORT”) | Portugal | Branch | Technology Services | 100 | 100 | 100 |
The Group also holds VT Comercio, a joint venture (“JV”) established in July 2019 with a participation of 50%. On August 30, 2023 the Company announced the termination of the JV. However, the Group has elected to maintain its participation until the dissolution terms are finalized, which is expected to occur in the following months.
9
VTEX
Notes to the condensed consolidated interim financial statements
(Unaudited)
In thousands of U.S. dollars, unless otherwise indicated
| 2 | Basis of presentation and consolidation<br><br> <br><br><br> <br>The accounting policies described in detail below have been consistently applied to all periods presented in these unaudited condensed consolidated interim financial statements, unless<br> otherwise stated. The financial statements are applicable for the group consisting of VTEX and its subsidiaries. The accounting policies have been consistently applied by the Group. |
|---|---|
| a. | Basis for preparation of the unaudited condensed consolidated interim financial statements |
| --- | --- |
| The unaudited condensed consolidated interim financial statements of VTEX Group for the nine-month period ended September 30, 2023, have been prepared in accordance with IAS 34 – Interim<br> Financial Reporting as issued by the International Accounting Standards Board (“IASB”).<br> <br> <br> The unaudited interim condensed consolidated financial statements do not include all the information and disclosures required in an annual consolidated financial statement. Accordingly, this<br> report is to be read in conjunction with the Group’s annual consolidated financial statements for the year ended December 31, 2022, and any public announcements made by the Group during the interim reporting period.<br> <br> <br> The accounting policies adopted are consistent with those of the previous financial year, except for the income tax estimation (see note 6) and the adoption of new and amended standards as set<br> out below.<br> <br> <br> The unaudited condensed consolidated interim financial statements are presented in U.S. dollars (“” or “US”), which is the Company’s functional and presentation currency. All amounts are<br> rounded to the nearest thousands, except when otherwise indicated. |
All values are in US Dollars.
10
VTEX
Notes to the condensed consolidated interim financial statements
(Unaudited)
In thousands of U.S. dollars, unless otherwise indicated
| b. | New standards, interpretations, and amendments adopted by the Group | |
|---|---|---|
| A number of amended standards became applicable for the current reporting period. The Group did not have to change its accounting policies or make retrospective adjustments as a result of adopting these amended standards. | ||
| c. | Critical estimates and accounting judgments | |
| --- | --- | |
| Management has made judgments and estimates that affect the application of the Group’s accounting policies and the reported amounts of assets, liabilities, income, and expenses. Actual<br> results may differ from these estimates. Accounting estimates and judgments are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the<br> circumstances. Revisions to estimates are recognized prospectively.<br><br> <br><br><br> <br>In preparing these unaudited condensed consolidated interim financial statements, the significant judgments and estimates made by management in applying the Group’s accounting policies and<br> the key sources of estimation uncertainty were the same as those set at the consolidated financial statements for the year ended December 31, 2022. No retrospective adjustments were made. | ||
| 3. | Cash and cash equivalents<br><br> <br><br><br> <br>The breakdown of cash and cash equivalents is as follows: | |
| --- | --- | |
| September 30, 2023 | December 31, 2022 | |
| --- | --- | --- |
| Cash and cash bank deposits | 16,651 | 18,930 |
| Time deposits, investment funds and others | 4,650 | 5,464 |
| Total | 21,301 | 24,394 |
11
VTEX
Notes to the condensed consolidated interim financial statements
(Unaudited)
In thousands of U.S. dollars, unless otherwise indicated
| 4 | Short-term investments | |
|---|---|---|
| September 30, 2023 | December 31, 2022 | |
| --- | --- | --- |
| Investments funds | 95,459 | 204,045 |
| Time deposits and others | 96,946 | 10,119 |
| Short-term investments | 192,405 | 214,164 |
| 4.1 Investment funds<br><br> <br><br><br> <br>The following table shows the changes in the balances: | ||
| --- | ||
| 2023 | ||
| --- | --- | |
| Opening balance on January 1 | 204,045 | |
| Additions | 7,158 | |
| Redemption | (120,670) | |
| Fair value gains, net | 6,928 | |
| Exchange differences | (2,002) | |
| Closing balance on September 30 | 95,459 | |
| 4.2 Time deposits and others<br><br> <br>The following table shows the changes in the balances: | ||
| --- | ||
| 2023 | ||
| --- | --- | |
| Opening balance on January 1 | 10,119 | |
| Additions | 105,192 | |
| Redemption | (18,788) | |
| Accrued interest | 7,934 | |
| Exchange differences | (7,511) | |
| Closing balance on September 30 | 96,946 | |
| 5 | Trade receivables<br><br> <br><br><br> <br>Trade receivables are as follows: | |
| --- | --- | |
| September 30, 2023 | December 31, 2022 | |
| --- | --- | --- |
| Trade receivables | 48,407 | 43,084 |
| Expected credit losses | (896) | (808) |
| Total trade receivables | 47,511 | 42,276 |
| Current | 41,591 | 36,844 |
| Non-current | 5,920 | 5,432 |
12
VTEX
Notes to the condensed consolidated interim financial statements
(Unaudited)
In thousands of U.S. dollars, unless otherwise indicated
| The changes in expected credit losses for trade receivables are as follows: | ||
|---|---|---|
| 2023 | ||
| --- | --- | |
| Opening balance on January 1 | (808) | |
| Addition, net | (1,093) | |
| Write-off | 997 | |
| Exchange differences | 8 | |
| Closing balance on September 30 | (896) | |
| The trade receivables by maturity are distributed as follows: | ||
| --- | ||
| September 30, 2023 | December 31, 2022 | |
| --- | --- | --- |
| Current | 45,417 | 39,188 |
| Overdue: | ||
| From 1 to 30 days | 1,331 | 2,087 |
| From 31 to 60 days | 452 | 454 |
| From 61 to 90 days | 257 | 359 |
| From 91 to 120 days | 234 | 295 |
| From 121 to 300 days | 716 | 701 |
| Total | 48,407 | 43,084 |
| 6 | Current and deferred tax<br><br> <br><br><br> <br>6.1 Deferred tax assets <br> <br><br><br> The balance comprises temporary differences attributable to: | |
| --- | --- | |
| September 30, 2023 | December 31, 2022 | |
| --- | --- | --- |
| Loss allowances for financial assets | 315 | 270 |
| Bonus provision | 1,556 | 1,712 |
| Lease | 396 | 392 |
| Share-based compensation | 3,524 | 3,130 |
| Tax loss (i) | 12,955 | 10,513 |
| Others (ii) | 1,985 | 1,693 |
| Total deferred tax assets | 20,731 | 17,710 |
| (i) Tax losses increase is driven mainly by the current investment position of the Brazilian operations. These amounts are expected to be offset in the foreseeable future.<br><br> <br>(ii) This amount refers mainly to temporary differences over accrued expenses. | ||
| --- | --- |
13
VTEX
Notes to the condensed consolidated interim financial statements
(Unaudited)
In thousands of U.S. dollars, unless otherwise indicated
| 6.2 Deferred tax liabilities<br><br> <br><br><br> <br>The balance comprises temporary differences attributable to: | ||||
|---|---|---|---|---|
| September 30, 2023 | December 31, 2022 | |||
| --- | --- | --- | ||
| Acquisition of subsidiaries | 1,206 | 1,409 | ||
| Temporary differences | 1,304 | 827 | ||
| Others | 568 | 228 | ||
| Total deferred tax liabilities | 3,078 | 2,464 | ||
| 6.3 Income Tax expense<br><br> <br><br><br> <br>Income tax expense is recognized based on Management’s estimate of the weighted average effective annual income tax rate expected for the full financial year. | ||||
| --- | ||||
| Three months ended | Nine months ended | |||
| --- | --- | --- | --- | --- |
| September<br><br> <br>30, 2023 | September<br><br> <br>30, 2022 | September<br><br> <br>30, 2023 | September<br><br> <br>30, 2022 | |
| Current tax | ||||
| Current tax on profits for the period | (50) | 260 | (2,317) | (741) |
| (50) | 260 | (2,317) | (741) | |
| Deferred income tax | ||||
| Decrease (increase) in deferred tax | (214) | (590) | 2,068 | 5,115 |
| (214) | (590) | 2,068 | 5,115 | |
| Income tax | (264) | (330) | (249) | 4,374 |
| 7 | Leases<br><br> <br><br><br> <br>7.1 Amounts recognized in the balance sheets<br><br> <br><br><br> <br>The balance sheets show the following amounts related to leases: | |||
| --- | --- | |||
| September 30, 2023 | December 31, 2022 | |||
| --- | --- | --- | ||
| Right-of-use assets | ||||
| Office buildings | 3,658 | 4,818 | ||
| Total | 3,658 | 4,818 | ||
| September 30, 2023 | December 31, 2022 | |||
| --- | --- | --- | ||
| Lease liabilities | ||||
| Current | 1,897 | 1,898 | ||
| Non-current | 2,817 | 3,737 | ||
| Total | 4,714 | 5,635 |
14
VTEX
Notes to the condensed consolidated interim financial statements
(Unaudited)
In thousands of U.S. dollars, unless otherwise indicated
| The following table shows the changes in the right-of-use asset and lease liabilities: | ||||
|---|---|---|---|---|
| 2023 | ||||
| --- | --- | |||
| Right-of-use assets | ||||
| Opening balance on January 1 | 4,818 | |||
| New lease agreements | 85 | |||
| Depreciation | (1,117) | |||
| Write-off | (324) | |||
| Hyperinflation adjustment | 5 | |||
| Exchange differences | 191 | |||
| Closing balance on September 30 | 3,658 | |||
| 2023 | ||||
| Lease liabilities | ||||
| Opening balance on January 1 | 5,635 | |||
| New lease agreements | 85 | |||
| Interest added | 441 | |||
| Principal elements of lease payments | (1,152) | |||
| Interest payment | (440) | |||
| Write-off | (94) | |||
| Exchange differences | 239 | |||
| Closing balance on September 30 | 4,714 | |||
| 7.2 Amounts recognized in the statement of profit or loss<br><br> <br>The statement of profit or loss presents the following amounts related to leases: | ||||
| --- | ||||
| Three months ended | Nine months ended | |||
| --- | --- | --- | --- | --- |
| September<br><br> <br>30, 2023 | September<br><br> <br>30, 2022 | September<br><br> <br>30, 2023 | September<br><br> <br>30, 2022 | |
| Depreciation charge of office buildings | 371 | 356 | 1,117 | 976 |
| Interest expense (included in financial<br><br> <br>expense) | 139 | 166 | 441 | 517 |
| Total | 510 | 522 | 1,558 | 1,493 |
15
VTEX
Notes to the condensed consolidated interim financial statements
(Unaudited)
In thousands of U.S. dollars, unless otherwise indicated
| 8 | Property and equipment, net<br><br> <br>Details of the Group’s property and equipment balance are presented below: | |
|---|---|---|
| September 30, 2023 | December 31, 2022 | |
| --- | --- | --- |
| Leasehold improvements | 2,506 | 2,811 |
| Machinery and equipment | 105 | 307 |
| Furniture and fixture | 753 | 836 |
| Computer and peripherals | 4,418 | 4,346 |
| Accumulated depreciation | (4,655) | (4,391) |
| Property and equipment, net | 3,127 | 3,909 |
| 9 | Intangible assets, net<br><br> <br><br><br> <br>Details of the Group’s intangible assets balance are presented below: | |
| --- | --- | |
| September 30, 2023 | December 31, 2022 | |
| --- | --- | --- |
| Software | 4,502 | 4,291 |
| Trademark | 230 | 218 |
| Intellectual property | 2,867 | 2,675 |
| Customer contracts | 9,451 | 9,394 |
| Goodwill | 21,476 | 20,965 |
| Others | 547 | 519 |
| Accumulated amortization | (8,900) | (6,852) |
| Intangible assets, net | 30,173 | 31,210 |
| 10 | Accounts payable and accrued expenses<br><br> <br><br><br> <br>The breakdown of accounts payable and accrued expenses is as follows: | |
| --- | --- | |
| September 30, 2023 | December 31, 2022 | |
| --- | --- | --- |
| Trade payables | 13,923 | 14,064 |
| Social charges | 6,888 | 5,537 |
| Profit-sharing | 9,631 | 9,484 |
| Provision for vacation and benefits | 7,173 | 5,506 |
| Others | 26 | 56 |
| Total | 37,641 | 34,647 |
| Current | 36,549 | 34,136 |
| Non-current | 1,092 | 511 |
16
VTEX
Notes to the condensed consolidated interim financial statements
(Unaudited)
In thousands of U.S. dollars, unless otherwise indicated
| 11 | Loans and financing<br><br> <br><br><br> <br>11.1 Breakdown of loans and financing<br><br> <br><br><br> <br>As of September 30, 2023, the Group no longer has loans to be paid as both Itaú and BNDES contracts were fully paid during the<br> first semester of 2023. More details on each loan are described in the table and footnotes below: | ||||
|---|---|---|---|---|---|
| Interest rate | Country | Maturity | September 30,<br><br> <br>2023 | December 31,<br><br> <br>2022 | |
| --- | --- | --- | --- | --- | --- |
| BNDES (i) | 6.5% p.a<br><br> <br>(Brazilian Reais) | Brazil | Mar/23 | - | 189 |
| Itaú (ii) | 100% CDI + 2.5% p.a<br><br> <br>(Brazilian Reais) | Brazil | May/23 | - | 964 |
| Total | - | 1,153 | |||
| (i) In March 2017, the Group raised R$15,577 corresponding to US$5,014 from Brazilian National Bank for Economic and Social<br> Development (BNDES) to finance the development of new ecommerce technologies. The last installment matured in March 2023.<br><br> <br>(ii) In June 2019, the Group raised €6,909, corresponding to US$7,782 for working capital purposes. On the same date, a swap was<br> contracted to hedge the amount against foreign exchange rate, designating the financial instrument as a fair value hedge. The last installment matured in May 2023. | |||||
| --- | |||||
| 11.2 Changes in loans and financing | |||||
| --- | |||||
| 2023 | |||||
| --- | --- | ||||
| Opening balance on January 1 | 1,153 | ||||
| Payment of loans | (1,238) | ||||
| Interest charged | 4 | ||||
| Interest paid | (5) | ||||
| Basis adjustment on the fair value hedge (i) | 42 | ||||
| Exchange differences | 44 | ||||
| Closing balance on September 30 | - | ||||
| (i) Losses on the financial instrument designated as a fair value hedge<br> referring to the loan in Euros with Itaú described above have been recognized as a financial expense. Refer to note 19.1(ii) for additional detail. | |||||
| --- |
17
VTEX
Notes to the condensed consolidated interim financial statements
(Unaudited)
In thousands of U.S. dollars, unless otherwise indicated
| 12 | Taxes payable<br><br> <br>The breakdown of taxes payable is as follows: | |
|---|---|---|
| September 30, 2023 | December 31, 2022 | |
| --- | --- | --- |
| Income tax payable | 1,414 | 673 |
| Other taxes payable | 2,710 | 3,615 |
| Total | 4,124 | 4,288 |
| Current | 4,124 | 4,128 |
| Non-current (i) | - | 160 |
| (i) The balance refers to sales taxes related to the WorkArea acquisition. | ||
| --- | ||
| 13 | Contingencies<br><br> <br><br><br> <br>The Group is party to civil and labor lawsuits involving loss risks. Provisions for losses resulting from lawsuits are estimated and updated by the Group, based on<br> analysis from the Group’s legal advisors.<br><br> <br> <br><br><br> <br> <br>The breakdown of existing contingencies classified as probable losses by the Group, based on the evaluation of its legal advisors, which are recognized as a<br> liability, is as follows: | |
| --- | --- | |
| September 30, 2023 | December 31, 2022 | |
| --- | --- | --- |
| Civil | 27 | 6 |
| Labor | 44 | 95 |
| Tax | 160 | 84 |
| Total | 231 | 185 |
| The breakdown of existing contingencies classified as possible losses by the Group, based on the evaluation of its legal advisors, for which no provision<br> was recognized, is as follows: | ||
| --- | ||
| September 30, 2023 | December 31, 2022 | |
| --- | --- | --- |
| Civil | 107 | 118 |
| Labor | 155 | - |
| Tax | 1,003 | 878 |
| Total | 1,265 | 996 |
| On October 9, 2020, Mirakl, Incorporated, filed a complaint for unspecified damages and preliminary and permanent injunctive relief in the United States<br> District Court for the District of Massachusetts against our subsidiary VTEX Commerce Cloud Solutions LLC, or VTEX USA, and certain of its employees that were formerly employed by the plaintiff. | ||
| --- |
18
VTEX
Notes to the condensed consolidated interim financial statements
(Unaudited)
In thousands of U.S. dollars, unless otherwise indicated
| On April 14, 2021, the court denied the motion to dismiss. On October 4, 2021, the court granted VTEX's motion to appoint an independent expert to manage<br> forensic discovery. On December 31, 2021, the court approved a forensic protocol to be employed by the independent expert. As of September 30, 2023, the parties are conducting discovery. Although VTEX plans to defend itself against such<br> lawsuit, the Company is not able to predict the outcomes of such lawsuit at this current discovery stage. On September 30, 2023 and December 31, 2022, this contingency was classified as possible, however at the end of the reporting period<br> it was not possible to estimate the future cash outflows at this stage of the lawsuit, and, therefore, it was not included in the table above. | ||||
|---|---|---|---|---|
| 14 | Shareholders’ equity<br><br> <br><br><br> <br>14.1 Issued capital<br><br> <br><br><br> <br>The total share capital is as follows: | |||
| --- | --- | |||
| September 30, 2023 | December 31, 2022 | |||
| --- | --- | --- | ||
| Number of ordinary nominative shares | 185,535,515 | 188,992,529 | ||
| Par value | 0.0001 | 0.0001 | ||
| Total issued capital | 19 | 19 | ||
| 15 | Revenue from services provided<br><br> <br><br><br> <br>The Group revenue derives mainly from the transfer of services rendered and fees<br> charged as services are provided, therefore, mostly recognized over time. Disaggregation of revenue by major product lines are as follows: | |||
| --- | --- | |||
| Three months ended | Nine months ended | |||
| --- | --- | --- | --- | --- |
| September<br><br> <br>30, 2023 | September<br><br> <br>30, 2022 | September<br><br> <br>30, 2023 | September<br><br> <br>30, 2022 | |
| Subscriptions | 51,718 | 39,720 | 144,571 | 115,420 |
| Taxes on subscriptions | (4,174) | (3,207) | (12,493) | (9,677) |
| Subscription revenue | 47,544 | 36,513 | 132,078 | 105,743 |
| Services provided | 3,235 | 2,370 | 9,133 | 6,880 |
| Taxes on services | (151) | (129) | (415) | (488) |
| Services revenue | 3,084 | 2,241 | 8,718 | 6,392 |
| Total revenue | 50,628 | 38,754 | 140,796 | 112,135 |
19
VTEX
Notes to the condensed consolidated interim financial statements
(Unaudited)
In thousands of U.S. dollars, unless otherwise indicated
| 16 | Earnings (loss) per share<br><br> <br><br><br> <br>Basic earnings (loss) per share attributable to common stockholders is computed by dividing net income (loss) attributable to common stockholders by<br> the weighted average number of shares of common stock outstanding during the year.<br><br> <br> <br><br><br> <br> <br>Diluted earnings per share are computed by affecting all potential weighted average dilutive common stock, including options and restricted stock units.<br><br> <br> <br><br><br> <br> <br>The following table contains the loss per share of the Group for the three and nine-month periods ended September 30, 2023 and 2022: | |||
|---|---|---|---|---|
| Three months ended | Nine months ended | |||
| --- | --- | --- | --- | --- |
| September<br><br> <br>30, 2023 | September<br><br> <br>30, 2022 | September<br><br> <br>30, 2023 | September<br><br> <br>30, 2022 | |
| Loss attributable to the stockholders of the<br><br> <br>Group | (2,374) | (11,542) | (16,913) | (52,095) |
| Weighted average number of outstanding<br><br> <br>common shares (thousands) | 186,024 | 190,842 | 187,106 | 191,096 |
| Basic loss per share | (0.013) | (0.060) | (0.090) | (0.273) |
| Three months ended | Nine months ended | |||
| --- | --- | --- | --- | --- |
| September<br><br> <br>30, 2023 | September<br><br> <br>30, 2022 | September<br><br> <br>30, 2023 | September<br><br> <br>30, 2022 | |
| Loss attributable to the stockholders of the<br><br> <br>Group | (2,374) | (11,542) | (16,913) | (52,095) |
| Weighted average number of outstanding<br><br> <br>common shares (thousands) | 186,024 | 190,842 | 187,106 | 191,096 |
| Diluted loss per share | (0.013) | (0.060) | (0.090) | (0.273) |
| As of September 30, 2023 and 2022, the number of shares used to calculate diluted net loss per share of common stock attributable to common stockholders is<br> the same as the number of shares used to calculate basic net loss per share of common stock attributable to common stockholders for the period presented because the potentially dilutive shares would have been anti-dilutive if included in<br> the calculation. The number of the potentially dilutive shares that would have been anti-dilutive is disclosed in note 18. | ||||
| --- |
20
VTEX
Notes to the condensed consolidated interim financial statements
(Unaudited)
In thousands of U.S. dollars, unless otherwise indicated
| 17 | Financial result, net | |||
|---|---|---|---|---|
| Three months ended | Nine months ended | |||
| --- | --- | --- | --- | --- |
| September<br><br> <br>30, 2023 | September<br><br> <br>30, 2022 | September<br><br> <br>30, 2023 | September<br><br> <br>30, 2022 | |
| Interest and dividend earned on bank<br><br> <br>deposits and financial investments | 4,820 | 300 | 9,875 | 597 |
| Foreign exchange gains | 1,114 | 2,098 | 5,288 | 5,910 |
| Gains from fair value of financial<br><br> <br>instruments (i) | 1,176 | 813 | 1,905 | 4,089 |
| Gains from short-term investments | 1,791 | 3,879 | 8,340 | 5,293 |
| Other financial income | 73 | 47 | 165 | 236 |
| Financial income | 8,974 | 7,137 | 25,573 | 16,125 |
| Foreign exchange losses | (1,655) | (2,032) | (9,395) | (5,612) |
| Losses from fair value of financial<br><br> <br>instruments (i) | (317) | (152) | (962) | (2,273) |
| Interest on loans | - | (16) | (4) | (52) |
| Interest on lease liabilities | (139) | (166) | (441) | (517) |
| Losses from short-term investments | (237) | (3,173) | (1,412) | (13,734) |
| Adjustment of hyperinflation | (5,361) | (1,707) | (10,221) | (3,786) |
| Other financial expenses | (187) | (81) | (490) | (488) |
| Financial expense | (7,896) | (7,327) | (22,925) | (26,462) |
| Financial result, net | 1,078 | (190) | 2,648 | (10,337) |
| (i) Refers to gain and losses on<br> change in the fair value of hedge instruments (Refer to note 19.1) | ||||
| --- |
21
VTEX
Notes to the condensed consolidated interim financial statements
(Unaudited)
In thousands of U.S. dollars, unless otherwise indicated
| 18 | Share-based compensation<br><br> <br><br><br> <br>18.1 Share-based compensation: VTEX<br><br> <br><br><br> <br>VTEX provides share-based compensation to<br> selected directors and employees as a stock-option plan.<br><br> <br><br><br> <br>Both stock options and Restricted Stock Units instruments (“RSUs”) are exercisable as long as the<br> director or employee fulfills the worked periods after the options are granted.<br><br> <br><br><br> <br>Set out below are summaries of stock options granted under the plan: | |||
|---|---|---|---|---|
| Number of<br><br> <br>options<br><br> <br>(thousands) | Weighted<br><br> <br>average<br><br> <br>exercise price | Remaining<br><br> <br>contractual<br><br> <br>terms in years | Weighted<br><br> <br>average grant<br><br> <br>date fair value | |
| --- | --- | --- | --- | --- |
| At January 1, 2023 | 9,714 | 4.18 | 4.37 | 1.41 |
| Granted | 883 | 4.73 | - | 1.97 |
| Forfeit | (483) | 6.34 | - | 3.70 |
| Exercised (i) | (750) | 0.84 | - | 0.53 |
| At September 30, 2023 | 9,365 | 4.05 | 3.84 | 1.31 |
| Stock options exercisable as of<br><br> <br>September 30, 2023 | 4,350 | 4.52 | 3.63 | 1.09 |
| (i) The number of stock-options withheld for tax purposes was 8.2 thousand shares. | ||||
| --- | ||||
| The fair value of the stock options granted is calculated based on the<br> Binomial Options Pricing Model considering the average contract term. The model inputs for options included: | ||||
| --- | ||||
| ● | Strike Price - Average price weighted by the quantity granted; | |||
| --- | --- | |||
| ● | Target Asset Price - The trading price closest to the granting date of the options or the trading price derived from an independent valuation report; | |||
| --- | --- | |||
| ● | Risk-Free Interest Rate - US Treasury interest rate, according to the contractual term; | |||
| --- | --- | |||
| ● | Volatility - According to comparable peer entities listed on the stock exchange. | |||
| --- | --- | |||
| The weighted average inputs used in the nine-month period ended September 30, 2023: | ||||
| --- | ||||
| ● | Target Asset Price - US$4.74 per share (December 31, 2022 - US$4.40 per share) | |||
| --- | --- | |||
| ● | Risk-Free Interest Rate – 4.14% (December 31, 2022: 3.83%) | |||
| --- | --- | |||
| ● | Volatility – 58.63% (December 31, 2022: 55.68%) | |||
| --- | --- | |||
| ● | Expected dividend: None | |||
| --- | --- |
22
VTEX
Notes to the condensed consolidated interim financial statements
(Unaudited)
In thousands of U.S. dollars, unless otherwise indicated
| The following table summarizes the RSU options granted under the plan: | ||
|---|---|---|
| Number of<br><br> <br>RSUs<br><br> <br>(thousands) | Weighted<br><br> <br>average grant<br><br> <br>date fair value | |
| --- | --- | --- |
| At January 1, 2023 | 3,509 | 6.94 |
| Granted | 1,181 | 4.13 |
| Forfeit | (262) | 6.42 |
| Settled (i) | (1,697) | 5.87 |
| At September 30, 2023 | 2,731 | 6.43 |
| (i) The number of RSUs withheld for tax purposes was 489<br> thousand shares. | ||
| --- | ||
| The fair value of the restricted stock units granted was calculated using the same Target Asset Price used in the Stock Options appraisal model.<br><br> <br><br><br> <br>In June 2023, the Group canceled some stock option instruments, and replacement awards were issued. The total incremental fair value of US$131 will be recognized as an expense<br> over the period from the replacement date to the end of the vesting period. The expense for the canceled stock option granted will continue to be recognized as if the contract had not been terminated. The fair value of the replacement award<br> was determined using the same models and principles of the canceled contract.<br><br> <br><br><br> <br>For the nine-month period ended September 30, 2023, there was US$ 7,635 of remaining unamortized compensation costs, including social charges, related to unvested stock options<br> and RSUs granted to the Group’s employees. This cost will be recognized over an estimated weighted average remaining period of 1.56 years. Total unamortized compensation costs will be adjusted for future changes in estimated forfeitures.<br><br> <br><br><br> <br>The total expense, including taxes and social charges related to the share-based compensation plan for the nine-month period ended September 30, 2023, was US$12,068 (the<br> nine-month period ended September 30, 2022: US$7,945). For the period ended September 30, 2023, the Group recorded in the capital reserve the amount of US$10,725 (the nine-month period ended September 30, 2022: US$8,503).<br><br> <br><br><br> <br>The Company must withhold an amount for an employee's tax obligation associated with a share-based payment and transfer that amount to the tax authority on the employee's<br> behalf. The Company is settling the share-based compensation on a net basis by withholding the number of shares with a fair value equal to the monetary value of the employee's tax obligation and only issuing the remaining shares on completion<br> of the vesting period. If all of the shares outstanding as at September 30, 2023 were subsequently vested, the Group would be required to pay taxes of approximately US$5,734 considering the stock price as of September 30, 2023. | ||
| --- | ||
| 18.2 Share-based compensation: Loja Integrada<br><br> <br><br><br> <br>On April 29, 2021, VTEX introduced a new share-based compensation plan to selected directors and employees as a stock-option and RSU plan in Loja Integrada, a subsidiary wholly owned. This share-based<br> compensation plan also has RSU and Stock Options. Under both stock-option plan and RSUs, the options have a term of 7 years as of the grant date. They are exercisable as long as the director or employee fulfills the worked periods after the<br> options are granted. | ||
| --- |
23
VTEX
Notes to the condensed consolidated interim financial statements
(Unaudited)
In thousands of U.S. dollars, unless otherwise indicated
| Set out below are summaries of stock options granted under the plan: | ||||
|---|---|---|---|---|
| Number of<br><br> <br>options<br><br> <br>(thousands) | Weighted<br><br> <br>average<br><br> <br>exercise price | Remaining<br><br> <br>contractual<br><br> <br>terms in years | Weighted<br><br> <br>average grant<br><br> <br>date fair value | |
| --- | --- | --- | --- | --- |
| At January 1, 2023 | 8.42 | 13.48 | 5.35 | 5.66 |
| Granted | - | - | - | - |
| Forfeit | - | - | - | - |
| Exercised | - | - | - | - |
| At September 30, 2023 | 8.42 | 14.81 | 4.61 | 6.22 |
| Stock options exercisable as of<br><br> <br>September 30, 2023 | 8.42 | 14.81 | 4.61 | 6.22 |
| The fair value of the stock options granted is calculated based on the Binomial Options Pricing Model considering the average contract term. The model inputs<br> for options included: | ||||
| --- | ||||
| ● | Strike Price - Average price weighted by the quantity granted; | |||
| --- | --- | |||
| ● | Target Asset Price - The trading price closest to the granting date of the options or the trading price derived from an independent valuation report; | |||
| --- | --- | |||
| ● | Risk-Free Interest Rate - Future CDI, according to the contractual term; | |||
| --- | --- | |||
| ● | Volatility - According to comparable peer entities listed on the stock exchange. | |||
| --- | --- | |||
| The following table summarizes the RSU options granted under the plan: | ||||
| --- | ||||
| Number of<br><br> <br>RSUs<br><br> <br>(thousands) | Weighted<br><br> <br>average grant<br><br> <br>date fair value | |||
| --- | --- | --- | ||
| At January 1, 2023 | 285.28 | 6.42 | ||
| Granted | 115.00 | 4.93 | ||
| Forfeit | (82.25) | 5.50 | ||
| Settled (i) | (63.58) | 6.62 | ||
| At September 30, 2023 | 254.46 | 6.38 | ||
| (i) The number of RSUs withheld for tax purposes was 0.7 thousand shares. | ||||
| --- | ||||
| For the nine-month period ended September 30, 2023, there was US$902 of remaining unamortized compensation cost, including social charges, related to unvested stock options and RSUs granted to<br> the Group’s employees. This cost will be recognized over an estimated weighted-average remaining period of 1.7 years. Total unamortized compensation costs will be adjusted for future changes in estimated forfeitures.<br><br> <br><br><br> <br>The total expense, including taxes and social charges related to the Loja Integrada share-based compensation plan for the nine-month period ended September 30, 2023, was US$2,330 (the<br> nine-month period ended September 30, 2022: US$222). For the period ended September 30, 2023, the Group recorded in the capital reserve the amount of US$141 (the nine-month period ended September 30, 2022: US$444). | ||||
| --- |
24
VTEX
Notes to the condensed consolidated interim financial statements
(Unaudited)
In thousands of U.S. dollars, unless otherwise indicated
| The Company must withhold an amount for an employee's tax obligation associated with a share-based payment and transfer that amount to the tax authority on<br> the employee's behalf. The Company is settling the share-based compensation on a net basis by withholding the number of shares with a fair value equal to the monetary value of the employee's tax obligation and only issuing the remaining<br> shares on completion of the vesting period. If all of the shares outstanding as at September 30, 2023 were subsequently vested, the Group would be required to pay taxes of approximately US$104 considering the stock price as of September 30,<br> 2023. |
|---|
| 18.3 Amounts recognized in the statement of profit or loss<br><br> <br><br><br> <br>The following table illustrates the classification of stock-based compensation in the consolidated statements of profit and loss which includes both stock-based compensation of VTEX and Loja Integrada: | ||||
|---|---|---|---|---|
| Three months ended | Nine months ended | |||
| --- | --- | --- | --- | --- |
| September<br><br> <br>30, 2023 | September<br><br> <br>30, 2022 | September<br><br> <br>30, 2023 | September<br><br> <br>30, 2022 | |
| Subscription cost | (90) | (171) | (196) | (338) |
| Services 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) |
| 19 | Financial Instruments<br><br> <br><br><br> <br>19.1 Financial instruments by category<br><br> <br><br><br> <br>The Company classifies its financial assets and liabilities under the following categories: amortized cost, fair value<br> through other comprehensive income and fair value through profit or loss. The classification by category and the corresponding accounting policies of each financial instrument in these condensed consolidated interim financial statements are<br> consistent with those applied and disclosed in the Company’s audited consolidated financial statements for the year ended on December 31, 2022.<br><br> <br><br><br> <br>(i) Financial instruments<br> valued at amortized cost<br><br> <br><br><br> <br>The Group has the following financial instruments valued at amortized cost: | |||
| --- | --- |
25
VTEX
Notes to the condensed consolidated interim financial statements
(Unaudited)
In thousands of U.S. dollars, unless otherwise indicated
| September 30, 2023 | December 31, 2022 | |
|---|---|---|
| Financial assets: | ||
| Cash and cash equivalents | 21,301 | 24,394 |
| Restricted cash | - | 1,608 |
| Short-term investments | 96,946 | 10,119 |
| Trade receivables | 47,511 | 42,276 |
| Total | 165,758 | 78,397 |
| Financial liabilities: | ||
| Trade payables | 13,923 | 14,064 |
| Lease liabilities | 4,714 | 5,635 |
| Loans and financing | - | 1,153 |
| Total | 18,637 | 20,852 |
| (ii) Financial instruments valued at fair value through profit or loss<br><br> <br><br><br> <br>The Group has the following financial instruments valued at fair value through profit or loss: | ||
| --- | ||
| Carrying amount | ||
| --- | --- | --- |
| September 30, 2023 | December 31, 2022 | |
| Financial assets: | ||
| Short-term investments | 95,459 | 204,045 |
| Derivative financial instruments (i) | 287 | 117 |
| Total | 95,746 | 204,162 |
| Carrying amount | ||
| September 30, 2023 | December 31, 2022 | |
| Financial liabilities: | ||
| Accounts payable from acquisition of subsidiary ("earn<br><br> <br>out") | - | 299 |
| Total | - | 299 |
| (i) In September 30, 2023, VTEX ARG had positions in<br> future derivative financial instruments raised through Matba Rofex designated as a protection from hyperinflation and exchange rate devaluation in Argentina. The notional value is US$6,500 and the last maturity date is in December 2023. | ||
| --- | ||
| For the nine-month period ended on September 30, 2023, the Group had positions in future<br> derivative financial instruments designed as a hedge of foreign currency risk in Argentina. The hedge contracts had maturity dates equal to those of the principal, which was raised through Matba Rofex. The last hedge contract is due<br> December 2023. Additionally, the Group no longer had positions in Swap derivative financial instruments designated as hedge of foreign currency debt raised through Itaú Bank, as these hedge contracts had maturity dates equal to those of the<br> loans raised in foreign currency (note 11), also raised through Itaú Bank, and both instruments last matured in May 2023. | ||
| --- |
26
VTEX
Notes to the condensed consolidated interim financial statements
(Unaudited)
In thousands of U.S. dollars, unless otherwise indicated
| The following amounts were recognized in profit or loss in relation to financial instruments: | ||||
|---|---|---|---|---|
| Three months ended | Nine months ended | |||
| --- | --- | --- | --- | --- |
| September<br><br> <br>30, 2023 | September<br><br> <br>30, 2022 | September<br><br> <br>30, 2023 | September<br><br> <br>30, 2022 | |
| Net gain on financial instruments | 859 | 661 | 943 | 1,816 |
| The following amounts were recognized in profit or loss in relation to short-term investments: | ||||
| --- | ||||
| Three months ended | Nine months ended | |||
| --- | --- | --- | --- | --- |
| September<br><br> <br>30, 2023 | September<br><br> <br>30, 2022 | September<br><br> <br>30, 2023 | September<br><br> <br>30, 2022 | |
| Net gain (loss) on short-term investments | 1,554 | 706 | 6,928 | (8,441) |
| a. Fair value hierarchy<br><br> <br><br><br> <br>This section provides details about the judgments and estimates made for determining the fair values of the financial instruments recognized and measured at fair value in the financial statements. The Group has classified its financial<br> instruments into the three levels prescribed under the accounting standards to indicate the reliability of the inputs used in determining fair value. | ||||
| --- | ||||
| September 30, 2023 | ||||
| --- | --- | --- | --- | |
| Level 1 | Level 2 | Level 3 | ||
| Assets | ||||
| Short-term investments | 95,459 | - | - | |
| Derivative financial instruments | - | 287 | - | |
| December 31, 2022 | ||||
| --- | --- | --- | --- | |
| Level 1 | Level 2 | Level 3 | ||
| Assets | ||||
| Short-term investments | 204,045 | - | - | |
| Derivative financial instruments | - | 117 | - | |
| Liabilities | ||||
| Accounts payable from acquisition of subsidiary<br><br> <br>("earn-out") | - | - | 299 | |
| There were no transfers between levels 1, 2, and 3 for recurring fair value measurements during the first nine months of<br> 2023. | ||||
| --- |
27
VTEX
Notes to the condensed consolidated interim financial statements
(Unaudited)
In thousands of U.S. dollars, unless otherwise indicated
| Fair value measurements using significant unobservable inputs (level 3)<br><br> <br><br><br> <br>The fair value of the earn-out classified as level 3 is calculated based on the judgment of the Group and the probability of meeting the<br> goals of each acquisition made during the year. The Sale and Purchase agreement of each acquisition is established if the clients of the acquired entities migrate to the Groups platform and reach an agreed amount, the seller will be<br> entitled to an earn-out. As at September 30, 2023, the fair value of the earn-out was nil (December 31, 2022 - US$299 ).<br><br> <br><br><br> <br>The following table presents changes in level 3 items for the nine-months period ended on September 30, 2023: | ||||
|---|---|---|---|---|
| 2023 | ||||
| --- | --- | |||
| Opening balance on January 1 | 299 | |||
| Earn-out adjustment | (299) | |||
| Exchange differences | - | |||
| Closing balance on September 30 | - | |||
| b. Fair values of other financial instruments (unrecognized)<br><br> <br><br><br> <br>The Group also has several financial instruments which are not measured at fair value in the balance sheet. As at September 30, 2023, these instruments’ fair values are not different from their carrying amounts<br> since the interest receivable/payable is either close to current market rates or the instruments are short-term in nature. Differences were identified for the following instruments at September 30, 2023: | ||||
| --- | --- | |||
| September 30, 2023 | December 30, 2022 | |||
| --- | --- | --- | --- | --- |
| Carrying amount | Fair value | Carrying amount | Fair value | |
| Financial assets: | ||||
| Short-term investments | 18,312 | 17,190 | 10,119 | 9,948 |
| Total | 18,312 | 17,190 | 10,119 | 9,948 |
| Financial liabilities: | ||||
| Loans and financing | - | - | 1,153 | 990 |
| Total | - | - | 1,153 | 990 |
| 19.2 Financial risk management<br><br> <br><br><br> <br>The risk management of the Group is predominantly controlled by a central treasury department (Group treasury) under policies approved by the board of directors.<br> Group treasury identifies, evaluates, and hedges financial risks in close co-operation with the Group’s operating units. The board provides written principles for overall risk management and policies<br> covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, the use of derivatives and non-derivative financial instruments, and investment of excess liquidity. | ||||
| --- |
28
VTEX
Notes to the condensed consolidated interim financial statements
(Unaudited)
In thousands of U.S. dollars, unless otherwise indicated
| 20 | Subsequent events<br><br> <br><br><br> <br>Subsequent share repurchase and canceling<br><br> <br><br><br> <br>During October and November of 2023, the Company canceled 1,165,669 Class A common shares, of which 79,829 shares were held in<br> treasury as of September 30, 2023, and 1,085,840 were repurchased after September 30, 2023 under the repurchase share program. |
|---|
29
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.
Overview
VTEX is the global enterprise digital commerce platform where brands and retailers run their world of commerce. Our platform is designed to be the operating system for the commerce ecosystem, enabling enterprise brands and retailers to orchestrate their complex network of consumers, business partners, suppliers, and fulfillment providers in one place. VTEX puts its customers’ business on a fast path to growth with a complete Commerce, Marketplace, and OMS solution. We help global companies build, manage and deliver native and advanced B2B, B2C, and marketplace commerce experiences with unprecedented time to market and without complexity.
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.
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Key metric— Gross merchandise value
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.
| Three months ended | Nine months ended | |||
|---|---|---|---|---|
| September 30, 2023 | September 30, 2022 | September 30, 2023 | September 30, 2022 | |
| (in millions of U.S. Dollars, unless otherwise indicated) | ||||
| GMV | 3,999.3 | 2,957.5 | 11,141.5 | 8,783.9 |
| GMV growth FX neutral (%) | 27.8% | 28.7% | 23.2% | 25.8% |
Seasonality and quarterly operations results
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.
31
| For the three months ended<br><br> (unaudited) | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| (in US$ millions) | September 30, 2021 | December 31, 2021 | March<br><br> 31, 2022 | June<br><br> 30, 2022 | September 30, 2022 | December 31, 2022 | March<br><br> 31, 2023 | June<br><br> 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<br><br> (unaudited) | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| September 30, 2021 | December 31, 2021 | March<br><br> 31, 2022 | June<br><br> 30, 2022 | September 30, 2022 | December 31, 2022 | March<br><br> 31, 2023 | June<br><br> 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)% |
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The following table sets forth our Non-GAAP income (loss) from operations for each of the periods indicated:
| For the three months ended<br><br> (unaudited) | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| September 30, 2021 | December 31, 2021 | March<br><br> 31, 2022 | June<br><br> 30, 2022 | September 30, 2022 | December 31, 2022 | March<br><br> 31, 2023 | June<br><br> 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.
33
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.
34
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<br><br> <br>30, 2023 | September<br><br> <br>30, 2022 | September<br><br> <br>30, 2023 | September<br><br> <br>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<br><br> <br>30, 2023 | September<br><br> <br>30, 2022 | September<br><br> <br>30, 2023 | September<br><br> <br>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) |
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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,<br><br> <br>except percentages) | September<br><br> <br>30, 2023 | September<br><br> <br>30, 2022 | Variation | September<br><br> <br>30, 2023 | September<br><br> <br>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,<br><br> <br>except percentages) | September<br><br> <br>30, 2023 | September<br><br> <br>30, 2022 | Variation | September<br><br> <br>30, 2023 | September<br><br> <br>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.
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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,<br><br> <br>except percentages) | September<br><br> <br>30, 2023 | September<br><br> <br>30, 2022 | Variation | September<br><br> <br>30, 2023 | September<br><br> <br>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,<br><br> <br>except percentages) | September<br><br> <br>30, 2023 | September<br><br> <br>30, 2022 | Variation | September<br><br> <br>30, 2023 | September<br><br> <br>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.
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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,<br><br> <br>except percentages) | September<br><br> <br>30, 2023 | September<br><br> <br>30, 2022 | Variation | September<br><br> <br>30, 2023 | September<br><br> <br>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,<br><br> <br>except percentages) | September<br><br> <br>30, 2023 | September<br><br> <br>30, 2022 | Variation | September<br><br> <br>30, 2023 | September<br><br> <br>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.
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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<br><br> <br>unrealized gain | Gross<br><br> <br>unrealized loss | Fair value | |
| Short-term investments | 91,597 | 3,862 | - | 95,459 |
| As at December 31, 2022 | ||||
| --- | --- | --- | --- | --- |
| Amortized cost | Gross<br><br> <br>unrealized gain | Gross<br><br> <br>unrealized loss | Fair value | |
| Short-term investments | 208,177 | 1,013 | (5,145) | 204,045 |
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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<br> 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<br> 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.
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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.
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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 |
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